Labor is typically closer to around $100/hr for a legit shop where someone is paying rent for a building that your car is secure (inside) while is their possession.
Even $100/hr is low with the state of things today.
26 hours (mascarading as an undervalued 18 hours of labour) to slap a grime covered junkyard engine into a car is a lot of time.
Committing that kind of money, represented as a sunk cost, to an unknown junkyard relic is problematic. And then to throw a bunch of new "good" parts at it is just setting yourself up for disappointment.
What recourse do you have when this all goes sideways? Who do you hold to account: you for trying to value-engineer a solution to a problem of your own design (fast/cheap/reliable: choose two) or this "guy" for taking advantage of a cash cow walking through his door.
Spend the other $3500 and do it properly with a crate motor and suitable transmission. Or don't.