Yes it can replace them. Right now it loads 99% of the presets correctly, but there might be slight sound differences in some of them. I removed the 2D Envelope and also the "inside" mode for filter distortion, so SM2 presets that features those won't sound the same (there are a couple of those in our factory+expansion banks)
SM3 see the factory/expansion presets of SM1 / SM2 only if they are installed. So you'd better keep them
Also, in SM3 there are 64 user assignable host parameters (the number if fixed, the first 16 are assigned to macros/xy pads). So, parameter automation is not compatible with SM1 / SM2.