Smith is respected by the leading vets on the team (Willis, Gore, VD) and they were not happy with the whole Manning charade. Harbaugh said what he did to try and appease Smith and keep the team unified behind him, JH. It's easy for a coach to lose a team...just ask Nolan and Singletary. By saying that he would have loved to have both Manning and Smith compete for the job he: a) appeases the vets, b) shows support for Smith and c) tells the league to ef off dissing his team.
Watched Comcastlive, or whatever it's called and they all assumed Harbaugh was lieing...no real evidence, just speculation. I trust Harbaugh to confuse the hell out of the media and make it a cause celeb for the team.