Yes Smith stood as "Corbyn-light" purposely to appeal to the influx of radical members. Eagle probably would not have won either, but the initial challenge was correct, and after that they should have backed her, not Smith.
It doesn't matter who makes the policies, and many of them are becoming clear, Labour won't win under Corbyn in 2020 no matter how much anyone frets about "Blairism" etc. No left-wing Labour leader (there actually have not been that many) has ever won a General Election and there's a good reason for that: precious few right wing Tories have ever won either. In other words, people tend to steer clear of extremes. Jeremy Corbyn and his band of zealous acolytes, many of whom mean well, are supremely out of touch with mainstream voters. Labour needs to convince the floating voters of Worcester and suburban Essex, not shore up the vote in traditional heartlands.
Then there's defence: he'll lose out to traditional, older Labour voters there too unless he adopts a more sensible approach there too.
Additionally, Corbyn was actually voted down by Smith in Scotland, so even the party activists there don't want him, never mind the voters, so it's a long way back there as well.
And that's before the constituency and voter register reforms kick in (if the former actually ever does)
They'll still be arguing about it on election night in 2020 and blaming "Blairites" no doubt :-)