Here's the thing about Khan: he's a racially superior super-human. Khan is, in fact, the head of the master race. This is his portrait:
|Khan immediately recognized this as himself, for whatever it's worth.|
After the rest of the world overthrew their dictators, Khan's regime fell, at which point he got the hell off of earth looking for better pastures elsewhere.
200 years later he wakes up, and we get the episode in which he is introduced.
He wasn't the only person to go by, "Khan," which led to people who knew about him well from history classes not realizing that he was that Khan even though they knew when that Khan disappeared from the historical record was about the same time this Khan left earth.
And they do know him. Even though only one character (the historian with an attraction to dictators who would be fridged in time for the movie) recognized him in person, several knew him from history. Kirk, Scotty, and McCoy all grew up admiring Khan, who was "the best of the tyrants" but also "the most dangerous."
After he takes over the ship and tries to kill Kirk --even then-- they're all in awe of him. Morally he was better than his environment, though still quite crap. In every other way he was better than they were. His superiority was never in question.
Look back up to that portrait and realize that that was the face of the master race of The Original Series. Mind you that's not the only face, his master race of followers includes no standard race but a mix of people from the entire geographic area he controlled (Asia to central Europe.) He happens to be the one that stands above them, but they're not all cast in his image.
This news was delivered in very racist ways by our trusty crew from the sixties, but it was delivered none the less. The character's off screen origins are also themselves fairly racist. Apparently Mr. Roarke wasn't considered white enough to be an Erikson, so they changed the character's name and origin. The change led to Montalban wearing make-up to make him darker because, while he was apparently not white enough to be an Erikson, he was also apparently too white to be a Sikh, from the northern region of India.
So there's a whole lot of racism in the concept, but here's the thing: the master race is not exclusively white. Not exclusively played by people of white Anglo-Saxon origins either.
When looking for someone to be the face of the master race they cast a Hispanic man from Mexico. The most mastery of all the masters. Then, they ended up making a character who had darker skin still. And this was a character who had the full respect, admiration, and awe of the three white-guy humans in charge of the ship.
Khan may be a bad guy, but he's also undisputedly better than the good guys in all areas not directly attributable to nurture over nature (and several areas that are.) He's smarter, he's stronger, he's more refined and more knowledgeable. He's charismatic and sexy. He's charming.
Even as the script makes you cringe at the painful, painful racism in so many lines, and even considering that Montalban was in a less extreme version of "black face" in the episode, there's still one shining beauty in the fact that the undisputed superior master race IS NOT WHITE. An actual master race because Khan really is a step above everyone else he meets when it comes to what he is.
As for who he is, he's a dictator that will use violence, theft, and murder to get back in the driving seat of some planet or other. And he kind of has to be.
If Khan had been raised in the 23rd century he'd probably be outshining everyone on the Enterprise and the main cast would be there to hold his coat as he solves the problems of entire planets in 30 minutes or less. (Later Star Trek shows sometimes realized that you can't always solve everything in an episode, but TOS had them doing just that and I don't think its unreasonable that he'd do it twice as fast as they did.)
If he'd been born in the 24th century... actually he was. He was played by Alexander Siddig (صدّيق الطاهر الفاضل الصدّيق عبدالرحمن محمد أحمد عبدالكريم المهدي) and you may know him as Deep Space Nine's Julian Bashir. Admittedly Sudan is not northern India, but the master race isn't (entirely) British message is still going on.
Though in Deep Space Nine he spends much of the show hiding his master race card because it'll get him kicked out of Star Fleet and the rest of it faced with intractable problems, an overwhelming army, and an evil conspiracy of people who think that them being evil is totes ok because they're making a better world.**
So, back to The Original Series, Khan's an asshole --an affable asshole-- but that's nothing to do with his race; when it comes to race he really is as good as advertised and that race happens to one of color.
Which brings us back to the beginning. Smaug is not a person of color. I know that he seems red, but that's all CGI. Smaug is in fact a white British guy. That's perfectly acceptable for a British dragon (though it becomes less acceptable when you realize that pretty much everyone in the movie is also white) but less so when it's the person of color who heads the master race. What are we looking for in a person of color who heads the master race? Apparently a white guy. A Hispanic white guy like the original? Nope. An Anglo-Saxon white guy.
Good work there, casting department.
Which is where the conversion went when discussing Khan.
The big, big problem with Smaug as Khan is that (have I beaten this point enough?) Khan really is genetically superior. Any actual racists making that claim are just bigoted assholes spewing bullshit, but Khan, as a defining part of his character, is genetically superior. His failings come from his personality, not his pedigree (which is flawless.)
Putting a white face on the example of actually genetically superior is fucking awful for a metric fuckton of reasons. Even more so because, racist as it was, Khan's origin at least delivered the message that genetically superior people can be from any race and the person at the top might not be a white Anglo-Saxon male.
* This happens off screen since all of his contemporaries, save his loyal followers, are long since dead by the time he shows up in Star Trek. His reputation, however, is known to everyone on the ship. There's a reason that Kirk gives someone who tried to kill him a planet to rule.
** They'd like the Operative from Serenity and they probably have coffee with Nick Fury from the Marvel Cinematic Universe.*** In fact I think I know what they do while they're meeting with Fury. Fury complains about how damned idealistic Steve Rodgers is and they respond with, "Yeah, well Julian Bashir did this." Which Fury then tries to top.
*** I was going to say tea, but if you think about it SHIELD and Section 31 seem more like coffee people. The Operative though, he's a tea drinker. I had to look up whether it's in the film (it is) or I just assumed it.