Any medium Smeargle Sketches is not used up. If you sketched a sword, you'd have the sword the whole match, unless it was robbed or broken.

First Action Taunt wouldn't stop Smeargle necessarily. If you are Taunted, Smeargle has access to moves like Struggle :/

If the move you draw doesn't have a medium, it still takes an action for the move to come into existance. Hence if you draw a Fireblast, it wold take an action before it flew off and scorched anyone, But if you did a sword, you could do any slashing move repeteadly. Any. Night Slash, Cut, Fury Swipes...yeah yer good.