First thing he has to do is declare that the rest of this season is for rebuilding. He needs to tell last year players like Allen, Singleton, Sutton, etc. that they are going to be cameo players and will likely sit a lot. They had their chance. They failed. Give the underclassmen plenty of playing time and get ready for next year. We aren't going to win against Ohio State, Indiana, or Iowa so there is no point is playing the losers who caused our demise.
100% no. So you're going to screw kids over who've been with the program for years, who have a draft coming up, and will be the future lettermen that help support/promote the program (unless you alienate them, of course) ...
The administration just fired Franklin. They just sent the message to everyone that Franklin was the problem. Now you're going to step in and, essentially say "well, it was really all these crappy players who didn't get the job done" by sitting them?
And you send the message that a future player could just be the victim of a scorched earth policy where everyone is severely punished if overall things don't go well (i.e. paying for the sins of others)?
Besides, there's a very good chance Smith gets the boot (or leaves of his own accord) after this season, as a new regime comes in and puts their plan (and staff) into place. Why's he going to toss away his best chance to look as good as possible, while showcasing players who may very well just transfer out at season's end?
He has to handle this much more maturely than you're suggesting.