Agreed on the smoke and mirrors.
All the agents, and managers, and bureaucracy that is part of the ATF will just get transferred to the FBI... or even worse... to a new sub-branch of DHS.
Probably end up with a Firearms/Explosives branch in DHS that wants to treat every gun purchase as a candidate for terrorist activity.
I don't know if eliminating the BATFE is a great idea. We've been able to keep the BATFE from having an actual director since 2006. Better a weak and disorganized adversity than a strong and relatively well organized adversity.
FBI would be very hard to counter if they pulled sneaky underhanded tactics. I know from personal experience the FBI has a more institutional sense of ethics, or perhaps just a longer history that allows them to realize one has to be subtle to get away with sneaky underhanded tactics. So likely the sneaky underhanded actions would be more rare, but harder to counter.
DHS? Oy. They're the only branch of the government more incompetent and flatly hostile to Americans than BATFE. They're under the institutional perception that everyone hates them for doing what is necessary in keeping the country safe. It leads to a generally sullen mildly spiteful environment.
Honestly, I'd rather we kept the BATFE around, slash their budget, slash their field personnel, refuse to let them have a director, and retract whatever discretionary powers we can from their remaining personnel. As I said, better a weak adversity that we know and already have on the ropes. Doing this to the FBI or DHS would be nearly impossible, and weakening the FBI might actually endanger the country rather than empowering it as we do by weakening the BATFE.
Weakening the DHS would probably be safer for Americans, though. They haven't caught many terrorists, yet they've made life a living hell for many Americans. Call me funny, but I see DHS as a more long term threat to the United States than terrorism.