1998 Toyota RAV4 '98 RAV4 - MIL due to computer malfunction

My Rav4 failed smog test "due to a warning lamp failure" - apparently officialese for "Check Engine Light on". The code provided by the testing center was P0340 Camshaft Position Sensor CKT Malfunction. There was reason to believe the sensor may have been damaged when the water pump and timing belt were replaced earlier in the year. The light had been on intermittently ever since that work was done.

The mechanic I took the car to couldn't find any problems with the sensor. As he put it, they ruled everything it could be out, so all that was left was a problem with the computer. I was quoted a price of $2500, as well as being told that a) new computers were not available so it would have to be a rebuilt and b) only one company rebuilds computers and they do crappy work. He also mentioned that the replacement part would have to go to Toyota for programming.

Q1: If it was a problem with the computer, wouldn't there be more of an effect on the car's performance? (The car runs as well as one would expect of a car badly in need of a tune up; since it's a Toyota, that's still pretty good!)

Q2: Computers rarely malfunction due to hardware. Why can't I just have my current computer reprogrammed?

Q3: The Fasten Seatbelt light also comes on in error intermittently, sometimes in unison with the Check Engine light, sometimes in sequence. Doesn't that indicate a need to at least check that there isn't a short or something in the dash before jumping to a $2,500 conclusion?