Could this be done?
Anything is possible, but I don't think it would be as easy as you're assuming it would be. There's no connection between a smartlist and what's playing. The smartlist generates a list, and the list is played (that's what you see in PN). Smartlists are also just searches that are used for a number of different things—some of which would be illogical to repeat.
There would have to be separate mechanism that monitors the progress of PN and "restarts" the smartlist when it would otherwise stop. It should probably be invoked only as it's own play mode (i.e., "Play (repeat)"), and not be applied when added to PN or called by another smartlist.
And there are still questions: How persistent should that be? If you added a few tracks while the list was playing, you'd probably still want the smartlist to be restarted. But what if you did something more substantial, like play a full album or a playlist—or another repeating smartlist? Should it continue after a stop? Would it be necessary to clear PN to end the monitoring? (I suppose so—this would be no different than Play Doctor is now.)