The basis for Smaug as Ring hero is that he turns more greedy and he will more actively search for ways to increase his wealth and internalize it. The reason for this line of thought comes from the theory that every creature in Middle Earth is affected differently by the Ring, in a way that certain characteristics are extremified (e.g. Dwarves dig deeper in their greed and are even sturdier; Men become corrupted by its power and are poisoned by it, like Boromir in Edain and the Nazgul; Hobbits become even more stealthy). Check out this website for the full theory:
http://oakroadsystems.com/genl/ringfaq.htm Smaug's abilities would turn into the following, many of which are improved versions:
Lvl 1. Toggle fly / land
Lvl 2. Presence of a Calamity (passive) / Fireball (turns blue at lvl 7)
Lvl 4. Golden Armour (active)
Lvl 7. Fearsome Roar / Wing Blast
Lvl 10. Hypnotic Gaze / Incinerate
The first clear difference is the passive skill 'Presence of a Calamity'. This is the improved version of Smaug's Presence that adds a passive decrease in speed and damage to standard units. The Fireball ability could also be improved but I don't yet know how. It could change into the removed Fire Flight ability with the argument that with Smaug under the influence of the Ring, he could actually conjure fires in different shapes.
The second difference is the 'Golden Armour' ability that replaces the 'Hoard the Treasure' ability. This is mostly inspired by the scene at the end of "The Desolation of Smaug" and it would include some new textures for Smaug. Basically it can be interpreted in two ways: either Smaug actually starts eating gold due to his lust for it the gold melts and internalizes in his blood and scales, which coats them with a golden layer; or he melts his mounts of gold and rolls in it to create a golden armour. In-game it doesn't matter how it is interpreted as his stats will be increased: first, it increases his armour permanently; second, it increases his damage for a short while (it hurst him so much that he starts raging); third, his health instantly decreases (due to the pain of liquid gold solidifying). Also, these changes will cost you resources, obviously as he eats/melts them. This changes can be intensified in several steps that have to be 'bought' one by one:
-The first upgrade costs 500 resources and subtracts 500 hit point from the total, and it increases his armour permanently and damage temporarily by 5%, and he gets a golden helmet;
-The second costs 1000 resources and hit points, increases armour permanently and damage temporarily by 15%, he gets wing protection;
-The third costs 2000 resources and hit points, increases armour permanently and damage temporarily by 30%, he gets leg and tail protection;
-The fourth and final costs 4000 resources and hit points, increases armour permanently and damage temporarily by 50%, and his full body gets a golden armour.
The main idea was to make the player pay a lot for improving Smaug's statistics, and thus increasing the risk of dying plus the fact that less money is available to recruit other units. This can all be balanced out, of course. Regarding the visual adjustments, if the team decides that it is too much work to make four new textures, I propose that the texture body armour only remains and is simply 'reforged' by Smaug.
The last difference is with the 'Hypnotic Gaze' ability: the target radius is improved to medium/large and the duration of the cripple effect is 10/15 seconds rather than 5/10.
The other high level abilities are dependent on the increased statistics that come with the 'Golden Armour' ability, therefore improving each skill as Smaug pays with his life (and your money). The exact statistics for 'Wind Blast' and 'Incinerate' are linked to the temporary damage boost and for 'Fearsome Roar' the duration of the fear effect.