From logic, Hashem is not a physical being that "smells" the physical odors of cooking meat. The sense of smell is the only one that is considered a "physical touching" with the "nonphysical". Similarly as part of havdallah we smell the basamim because of the loss of the neshamah yeseirah.
Hashem is stating that from Noach's actions he sees that he is attempting to raise himself above the purely animal and that even though the Yeitzar Hara is active, people are still capable of reaching the heights. Thus, each person will be judged by what he has managed to accomplish and the entire world will be able to continue.
It was only because everyone had lowered themselves to the animal (and below) that the world no longer had a purpose. Now that Hashem sees that even though people had fallen they retained their ability to create a "pleasant odor" (a spiritual rise), thus the world has a purpose and can exist.
Note the connection between the words Reiach (smell) and Ruach (spirit). Also note Moshiach is called "mari'ach veda'in - he is able to judge a person by merely "smelling" him." (Sanhedrin 93b)
Rav Shimshon Rafael Hirsch translates רֵיחַ הַנִּיחֹחַ as "expression of compliance" rather than as a literal smell. He has a large section explaining this and why the idiom of smell is used, but it is too long to copy into this post. Look up Rav Hirsch on Noach 8:21
Here we see
Judaism teaches, "Which sense does the soul enjoy but not the body?
This is the sense of smell." In other words, smell is spiritual.
Thus, we attempt to revive a person who has fainted with smelling
salts, because scent reaches the essence of the soul, which is never
unconscious. The soul, which is revitalized by the scent, then infuses
new life into the body. At the Havdala ceremony performed after
Shabbat has ended, we make a blessing on aromatic spices, and then
smell them, to refresh our souls which are saddened by the loss of the
special Shabbat dimension.
For example in The Kabbalah of Smell we have an excerpt
In my grandfather’s synagogue there was a bottle of pungent-smelling
salt. A senior member of the congregation explained to me that the
bottle was set aside for Yom Kippur, the holiest day in the Jewish
calendar, a day when all fast. “In the event that someone faints,” he
said, “we pull out the bottle and place it beneath the individual’s
nose. It does the trick. It brings the person back to consciousness.”
While I never personally witnessed such an incident, it got me
thinking. Why not just stuff a piece of cheesecake in the person’s
mouth? Would that not do the trick?
Similarly there is a comment
The Sense of Smell is directly wired to the area of the brain where we
retain our memories. Remove this sense and a human being's identity
loses its internal compass (and to a degree, its spiritual compass
based on what you have shared). Anosmia is the name for the loss of
the sense of smell; and it is a loss in the highest sense. Anosmia is
one of the early signs of Alzheimer's and Parkinson's Disease. Taste
+Smell = Flavor so one cannot enjoy food as much when one loses their ability to smell. These are facts, not opinions. Kindly consider them
the next time you write about the sense of smell.
Consider this person's account of what happened when she lost her sense of smell. It is indeed more significant than we can know.