Steem would need to execute arbitrary logic based on new arbitrary function/feature (called smart contract on other chains) stored on chain

No, it would need to implement whatever function/feature was being added, not necessarily smart contracts.

You probably think that witnesses have extra time between blocks but no, they don't have it, all nodes operates in a schedule, if you add any heavy computation to a node you will end up with congestion or worse multiple forks.

Can you expand on what you mean by that? Perhaps walk through a hypothetical example of what happens when a witness node is overloaded.

I can continue like this and point out more misunderstanding

Can you?