Engine knocking at cold start, coolant drain.

Thanks Ray, I did go with H* M***** after checking their yelp rating. Right now I have mixed feelings about that decision. Last Friday I went to their shop and inquired about an engine. The guy I talked to said they had a 40.000 mile engine I could buy for $1800 or pay an extra $ 400 and have them install it. I went with $2200 installed. We shook hands on it and I set up an appointment for the swap Monday morning.
Monday morning the 40000 mile engine was no longer available, not even after a lengthy discussion in Russian between the guy I had made the deal with and the owner of the shop. At that point I should probably have walked away. But, impressed as I were with their 5 star yelp rating, I agreed to have a 70.000 mile engine installed instead. I found it odd that the price didn't drop some with the higher mileage engine, but let it go. They called Tuesday and recommended also replacing the water pump, $150, and the catalytic converter, $250, and I agreed to both. Picked up the car on Wednesday, the total was $2,740 with tax.
Uber'ed in the car all day Friday and discovered a few things: At low RPM's like in back to back traffic, the engine is noisier than the original engine. The idle sounds and feels a bit rough. When starting after a stop up a steep San Francisco street, the car stalled a couple of times, nothing happened when I floored the accelerator, had to do it repeatedly. This started happening with the old engine towards the end of its life. The mpg was 2-3 miles below where the original engine was in its hey day. Thought I noticed a slight smell of coolant towards the end of the day, but it may have come from the outside or from my imagination, I was tired.
Today I noticed that there was too much engine oil in the engine. Decided to dump it and refill to correct level. Doing this I discovered that the oil drain plug was way over torqued, had to use a breaker bar. Dumped the oil into a clean tub, it looked sort of dirty to me and I replaced it with new oil. The dumped engine oil was full of small black particles, see attached photo, I dont understand why the oil filter has not removed them.
Going over the engine I noticed that it was very corroded on the outside (flooded or life in a much wetter/ colder climate?) and that some of the connectors in the back were caked in oil. I have not been able to locate the VIN tag, which may help me to cast light on the history of the engine. Some excess sealant is sticking out here and there, never seen that on an original engine, making me suspect the engine is rebuilt at some point. I'm going to keep driving the car and monitor its performance, coolant level, oil level, but I'm a little uneasy about all this.
Any advise appreciated, I did get a 6 month warranty.
Thanks, Troels

 

Update: 5 months and 20,000 miles later, I have had no problems with the rebuild engine. Getting good gas milage, very low oil consumption, lots of power, it's a good engine, corroded on the outside and vin removed or not.
HP Motors in Rancho Cordova hereby recommended.