Where is 3rd rail being used for light rail? The only proposal, even, that I've seen for that was the early plan for the LA Green Line (which ended up overhead wire like all other electric LR lines I've heard of)? 3rd rail power distribution is used almost exclusively for heavy rail transit like BART and NY subways, and on a few old surface lines like LIRR and MN. If somebody refers to BART as light rail, they're probably writing as a clueless member of the press, possibly operating from a sweatshop overseas.

Yes, there's some potential for confusion when talking about diesel-powered LRVs compared to electric, but it's usually pretty clear what's going in in context.

SMART is not light rail anyway - it's FRA-compliant commuter rail as is the Toronto line. Think of the cars as modern RDCs.

You actually can have a greater variety of power distribution methods for streetcars. While they are almost exclusively run from 600-750 VDC overhead wire in the U.S., not counting the slot 3rd rail used by PCCs for a time in downtown Washington DC (so overhead wires wouldn't obscure views of the Capitol), that's not true everywhere. Some cars (usually with very short, slow runs) operate from batteries that are changed out or recharged periodically during the day. A few (mostly amusement trolleys) have small diesel or gasoline engines, and I've seen generators on a small car towed by a streetcar used for temporary operations on a non-wired or incompatible line. Overseas, there are some interesting arrangements such as inductive loops or embedded contacts (sort of like a grown-up Marklin train?) in the trackway, loops or embedded contacts at stops to recharge batteries, or some kind of trolley/pantograph that charges batteries at station stops, that avoid use of overhead wires in scenic or other sensitive areas.