He said something like if Smeagol had been given more time to win that argument and had found redemption, in the end he would have taken the ring from Frodo and then would have thrown himself along with the ring into the cracks of Doom to save his master.
Tolkien did say in that same letter that Smeagol would have become the focus of the story at that point, if he had found redemption.
Carton, you should probably read letter #246, I seem to remember lots of good stuff about Smeagol was in there...