I don't think Carmelo fits in with the current Nuggets team. This team is predicated on guys being able to move without the ball, set screens, and knock down shots directly off a pass. Carmelo is more of an isolation scorer, at his best when he can break down defenders one on one and get to the basket.
He can at least play in the fast break offense as he did it for most of his run here, but the Nuggets are currently structured around Nikola Jokic's strengths. He's the guy that the offense has to run through, and being such a unique beast means he needs certain types of players around him.
Carmelo is still a much better player than Will Barton, but Barton is a better choice to start at small forward on this team. He's young, athletic, he can knock down jumpers from anywhere, he's willing to do the dirty work, he cuts to the basket consistently when he doesn't have the ball, etc.