My answer came from my perception of the question: will overly-crafted fifty-dollar words beloved by the author get in the way? Yes. Indubitably.
But… if wordsmithing is the deliberate crafting of words for effect, then it goes either way. Wordsmithing can make prose sound stilted and false, or it can raise an otherwise okay piece of writing to a whole new level. This is especially true in dialogue, and vital to comedic dialogue.
Every time I watch Toy Story–and with 4 & 9 year old boys, that’s often–I’m struck by one particular line. I laugh every time, and it has to be in the wordsmithing.
After discovering that he is merely an action figure, a hopeless and dejected Buzz is found by the little girl, dressed in an apron, and set into a tea party which includes a headless doll. When Woody finds him and asks “What happened to you?” Buzz’s answer could have been:
I’m having a tea party. Or
I really am just an action figure, so I’m having tea with my headless friend over here.
Instead, Buzz replies:
One minute you’re defending the whole galaxy, and suddenly you find yourself sucking down Darjeeling with Marie Antoinette and her little sister.”
That line is perfect, and it’s all in the words and details. It had to have been very deliberately crafted with words chosen and discarded for maximum effect. So, can wordsmithing get in the way of the story? Yes. Can wordsmithing make the story? Also yes. What does wordsmithing mean to you?