"Way" here would be a very informal, casual and conversational, substitute for "much". I do not think it would be accepted in formal English, at least that would be my opinion as a teacher.

Excellent answer! Thanks!

If it's in a script I think both are acceptable. If I want to use 'way'... I usually say it They're waaaaay smarter than anyone ever expected. As interchangeable as those two are. I reckon the emphasis of the sentence is a tiny bit different. For me: 1. They're way smarter than anyone ever expected <-- the emphasis is on how FAR their actual intelligence level from the expectation. 2. They're much smarter than anyone ever expected. <-- the focus is on the word 'smarter' while the 'much' here doesn't steal the spotlight. Probably I'm not making any sense. But, yea.