No, exile doesn't increase your smite damage. Its not a bad runeword overall but just not for smite damage usually. HoZ when upgraded has a base of 46-46 smite damage (yes, min/max are same number). I've never seen anything better than that. Also because of the effective +4 to combat skills you get something like an additional 12 from the boost to holy shield, an additional +60% from smite, and more than +30% from fanatacism's boost as well. Smite damage is really all about getting holy shield and fanatacism as high as possible. So even if you found an amazing pally shield with better smite damage to make exile in, your overall smite damage would probably not change by too much, because you've sacrificed all your skills from HoZ (unless I'm remembering something wrong - I don't think exile gives + skills). Finally HoZ + Pdia (or Um) will take care of a lot of resist problems. Finally with your holy shield being maxed out there's not nearly as much need to get the defiance aura from exile. I get plenty of defense using upped HoZ, upped Shaftstop, and so on, without needing to stack on the defiance aura (which would only give you an additional few thousand defense anyway). And lastly, as a smiter, you should be able to hit first and knockback most opponents before they can touch if you they are melee, meaning that defense is even less important (still important to be very high, just not as important as for some other builds).
If you DO make exile make sure to make it in an ethereal elite paladin shield, since it has the repair mod.
