1996 Toyota Tercel salvaged engine

My car broke down, going to visit family, during the holidays. I had it towed to a repair.

Repair shop looked at it and advised it was a rod and my options were:
1) new/rebuilt engine installed would be about $3000 with a 3 yr warranty
2) salvaged engine (as that is how they would be obtaining the engine as well) would cost me the salvage price (if I locate and have it delivered) plus installation $1500, warranty would be 1 yr on parts & labor and then whatever warranty came with the engine.

(Salvage yard told me on phone 6 month warranty however when picked the car up 8 days later from the repair shop, the engine paperwork indicated 30 day warranty which now 9 days are already gone.)

Salvaged engine was deleivered to the repair shop and repair shop installed it.

When I picked car up from repair shop, they advised me to keep eye on oil level as it is smoking some. I asked if it would pass smog and was told they dont know they just installed the engine, they didnt check the engine out.

Engine seems to run fine except for excessive smoke (vehicle never smoked at all with old engine, if that makes a difference) I doubt it will pass smog either.

I need to know what my options are.

Do I have to pay for another diagnostic test in order to go back to the salvage yard and say "hey this engine is no good"?

Do I have to now, take car in specifically for engine repair work? In addition to the installation?

And the even if the Salvage yard took the engine back or replaced with another, I would still have to pay the installation again?

Obviously I should have asked many more questions in the beginning, but I had no idea of this outcome even being a possiblity.

Please, please, help!