What should labor cost to replace engine be?

We don't get involved with costs here because there's way too many variables. Visit a couple of local shops for estimates. You'll need to tell them if the car has air conditioning, cruise control, how rusty it is, and things like that.

Companies that publish book values use a variety of sources including auctions prices, wholesale prices for sales between dealers, and retail sales prices. Different companies use different sources. All of them include additional features that must be included, like automatic transmission, low mileage, air conditioning, and anti-lock brakes.

Personally, I would spend whatever it takes to fix your car before I would put that same amount of dollars toward a new car. Just in the last week I've run into six very expensive repairs that all required new computers, and all for things we've had for decades but never needed a computer for before. The engineers have gone insane with all the unnecessary electronics. I will never buy another new car unless they come out with one built with some common sense.

You found some good engine prices, but be aware that most shops are going to quote you a price for the full job including the cost of the engine. They are likely not going to allow you to supply the engine, for a very good reason. Doing so is like bringing your own food to a restaurant and asking them to cook it for you. If you don't like the quality, who are you going to blame? With customer-supplied parts, new or used, it is possible to get a defective one. When the shop buys it, then sells it to you at a small markup, just like any other store, that profit covers part of their cost of doing the job a second time if that part is bad. When you supply a part and it proves to be defective after the job is done, you get to pay again to have the work done a second time. They were not involved with selecting or purchasing the part so they are not responsible for its condition or quality.

As for the labor cost, most shops use a "flat rate" guide that specifies the number of hours to perform each procedure. It will tell them to add a specific number of tenths of an hour for things like air conditioning, all-wheel-drive, or any other variables that will make the job take more or less time. That way all shops will quote the same times and the only variable will be their hourly shop rate. If the mechanic is experienced on your model or has invested in the best tools or training, he can get the job done faster, but you still pay the same amount. If the mechanic runs into problems like rusty bolts, a broken tool, or trouble finding the right service information, and it takes him longer than "book time", you still pay the same amount. Flat rate is like paying your neighbor's kid ten bucks to mow your lawn regardless if he uses a scissors and takes all day or uses a riding lawn mower and takes five minutes.