Smile Darn Ya Smile is a cartoon that has some plot similarities with Trolley Troubles, a 1927 Oswald film Harman-Ising worked on along with Disney. Both cartoons involve a cow blocking the track but both trolley operators were able to get pass. The only difference is this one has more improved graphics and makes clever use of the music.
One notable gag in the film involves Foxy using a pin to deflate a hippo, making her fit in the trolley. This gag has been branded by critics of the character as a so-called "Disney Swipe." I don't think Harman-Ising can be blamed for applying that, considering a similar one also appears in Spooks, a 1930 Oswald cartoon. Plus, it's probably not possible to patent a gag the way it's possible to copyright a film.
Due to Foxy's appearance resembling Mickey who is much more famous, a number of film fans are so quick to criticize the fox as a cheap copy of the latter. However, a document from a book called The Hand Behind the Mouse gives a much different story. In it, Hugh Harman drew pictures of mice on a portrait of Disney in 1925. A few years later, Disney and Iwerks used this idea as their basis for creating Mickey. Therefore, I guess it is true to say Harman and Ising were never imitating Disney or anyone in particular.
Why Foxy was short-lived in the Merrie Melodies series? As logical of a reason I can suggest, it's possible that he was only created as an experimental character, along with Piggy and Goopy Geer. In other words, they were intended to be just curtain raisers for Harman-Ising's main character Bosko. Bosko was a character whose popularity once rivaled Mickey until some flawed redesigning cause that guy to end up in the scrap.