You are right.
A stud LT (Smith) makes a huge difference . . .
. . . especially when the most important player regarding your team's success is a pocket passing QB.
Signing a free agent in a position of need "gives you an extra pick in the draft":
You can sign Smith and move Jackson and Avila saving you from having to use a top pick on OL and allowing you a top pick on Edge, CB, S, LB, WR, etc.
So yes it costs to sign Smith (or other free agents), but you do receive payback:
1. You have HOF LT
2. You get pick at needed position on a rookie contract which reimburses you some of Smith's cost. All of his cost if the pick turns out real good (Nacua/Turner)