if a user gets finally enough ability and the certain amount of merits for the account to be upgraded to a higher level, does the number of smerits increase as well?
No they dont. sMerits are given by default to this accounts that were already there when merit was started. They get 1 sMerit for every 2Merit they receive but other than that they dont get any other sMerit. Exception to this is the merit sources. Their sMerits are refilled every month so that they can distribute them.
and from the merits that this account is rewarded from others what percentage of them are becoming smerits?
You need to read the post about merit from theymos. Everything is written there. Still - for every 2Merit that one receives they get 1sMerit to distribute.