I have never been to Smuggs, but looking on google Earth, it appears as though Madonna I runs up a ridge for the most part as it ascends to the summit. This would makes it tough to move the base of the lift up as the only trail that crosses back to liftline is Link. Locating it at Link would shave 2000' off the bottom of the lift. Again I have not been there, but to me it looks like Madonna II has the terrain to handle being a High Speed Quad as it serves only intermediate terrain. Maybe if Madonna II, Morse, and Sterling were upgraded to High Speed Quads (6 Packs seem overkill), Madonna I could either be shortened or remain as is and be marketed as a Castlerock or MRG Single chair type of lift. Make the rest of the mountain modern and competitive with rival mountain lift systems, but keep Madona I and therefore the Summit of Madonna as a classic mostly expert trail pod, and market it as such.
I've long felt they should move the base of Madonna I to exactly where you suggest, where Link goes across. I think it would be fine that you couldn't access the lift from the Sterling side. That would only reduce traffic on the lift. I've also felt a HSQ for Madonna II makes sense. I'd rather see that than capacity raised over on Sterling. Liftline at Sterling sucks, but the lift is fine. A HSQ on II would reduce the line and trail traffic on Sterling considerably.