The Oracle isn't an actual human, it's a representation of a program that runs in the Matrix, so I wouldn't think it applies to that.
And you are right, it doesn't sound correct to say that there isn't anyone in the Matrix anymore because Smith did take over everyone.
However..... My original argument can still be intact in some way. Now lets get back to the movie a little bit here.. Agent Smith took over the Oracle, and when that happened it was visual apparent that he undertook an extreme power by doing so. Now Neo being an anamoly and all, I think it's also safe to say that he was the most powerful of them all to overtake. Another thing we know is that Neo brought some of his powers outside of the Matrix (being able to detect/control sentinels).
Maybe that was an essential part of it... By Smith actually taking over the One he can also assume the powers that Neo had in the outside world. So it wouldn't at all be ridiculous to say that Smith took more of a human form when that happened. Well we see Smith being deleted. Smith is fused with Neo.. Neo seems to be incredible fused to the Matrix (being able to use powers outside of it).
My conclusion is, when the kernel deleted Smith which overtook Neo which was fused tightly with the Matrix. It deleted Smith but at the same time deleted Neo inadverently but essentially. Back to my original formula:
Virus = Smith = Neo = Dead
If you don't agree with my reasoning please argue it, I love conversing over the events that happened throughout the Matrix movie. Not to say that I'm right, but I'd like to think I have a good grasp of what went on.