The world of the machines only looks horrifying to human eyes. Viewed objectively it is a paradise: in other words, a harmonious perfectly balanced eco-system. They have achieved what we, with our technological Towers of Babel, gesture towards.
In this sense Agent Smith is the real hero of the piece. He seeks to eradicate the causes of imbalance. As he says, human beings are like a virus. We threaten paradise. Agent Smith - Angel Smith - seeks to preserve the Garden of Eden, by eradicating that which would throw it into chaos.
Neo looks out at paradise and is horrified.
He wants his games, his imbalance, his imperfection. This is the truth that lies beneath all of our moralistic posturing: that none of would really want paradise if we knew what it truly meant.