The only problem with using a smokeshell is that the AI wont use it in open combat unless scripted to. I dont think you can avoid scripting here.
Your best bet would be to create 2 new weapons in a config, one would be the dummy flare, modelled as a handgrenade. Add a fired EH to the unit in the config and when the dummy flare hits the ground, substitute it with a new weapon that glows (like zig's lightstick things) PLUS a smoke shell.
Could eb quite laggy tho but I dont know from experience any other way it would work. You could try adding smoke and a light object to the same weapons again but I doubt it'd work.
Alternativly you could use the drop command for te light effect and when fired, just fire a smokeshell and attach a drop particle to it (possibly by a looped script) something like this ...
; script requires the fired EH to activate it
_unit = _this select 0
_ammo = _this select 4
_missile = nearestobject [_unit,_ammo]
_timer=0
_endtimer=400
#loop
_pos = (getpos _missile)
_vel = (velocity _missile)
@ true
drop ["koulesvetlo", "", "Billboard", 1,2, [0,0,0], _vel, 0, 1.275, 1, 0, [5,6,5],[[1,1,1,1],[1,1,1,1]],[0],0,0,"","",_missile]
? _timer > _endtimer : exit
goto "loop"
I'm not to sure about the "koulesvetlo" model, it's something I got off an old tracer script I made. The glow may be longer or shorter than the smokeshell lasts. To fix this, fiddle with the _endtimer figure.
Hope this helps