The problem is that whichBin function in the script which (no pun) uses "do shell script". Do shell script just invokes /bin/sh w/o sourcing any of the users environment. You'll see this if you open up script editor and run the following script:
do shell script "env | sort"
So you've got two options:
1) Use .MacOSX/environment.plist to modify the PATH that is part of your login environment. Google on "environment.plist" if you need more information...
2) Just edit the script to have a hard-coded path to wherever you chose to install smate.
However, all of this raises the question: how often do you guys go editing privileged files that you need not only a CLI wrapper around mate, but a droplet to boot? What are you people doing? :-)