The 49ers would be quite unhappy if they had to have Colin Kaepernick starting for them next year. He is entirely untested and they are a Super Bowl-caliber team.
I'm not sure we know they'd "quite unhappy" but it certainly isn't ideal. However, if they ARE after Manning they wouldn't be bringing Smith back as the backup, they'd have Kaepernick as the backup to a guy with a broken neck. They spent a 2nd round pick (36th overall) on him last year, when they did so much to improve Smith's confidence.
I'm also not sure that telling Alex Smith to "suck it up and deal" is a great idea. That approach generally doesn't work particularly well in professional sports, and the Niners spent all of last year bending over backwards to (successfully) improve Smith's confidence.
You think Alex Smith is so mentally fragile that he cannot handle the 49ers interest in Peyton Manning? How about they tell him it's a business? That Peyton Manning is a future HoF QB and, you, Alex Smith are just not as good? Can Alex Smith not handle the truth?!
According to an article
All of that said, it was pointed out upthread that Smith and Manning share an agent. This information, combined with the fact that it doesn't make any sense in a vacuum that Smith hasn't signed yet, suggests to me that Condon is working with the Niners to keep Smith happy ("hey, they're kicking the tires on HoFer -- don't get upset") while they consider Manning.
over in the 49ers thread, Smith is happy with the terms of the 49ers offer and that Condon was "working out the details". This was Sunday. It's Friday. I think it's highly likely that Tom Condon (who also reps Brandon Lloyd and has a contentious past with the Pats) knew about Manning's "secret" workout and Smith didn't. Smith's beef is with his agent, if he wasn't told Manning was working out for the 49ers, not the 49ers.
Of course, your interpretation is equally plausible - Smith knows (and has known since he agreed to terms on or before Sunday) that the 49ers are "in" on Manning and he has agreed to put his own interests aside for the time being. This might include an offer from Miami or another suitor (Cleveland?). Perhaps Condon is the model of professionalism and he has represented both clients fairly and equally throughout this process.