The heads were going on a 350: small bore means clearance issues with large valves.
The other shop may have padded the bill a bit as well, especially when looking for "anything wrong". It sounds like a difference in opinion about when exhaust guides and valves need replacing. I know shops that do everything whether it's needed or not ("not new" = needs replacing), and others that will help save the customer money when possible.
A set of exhaust valve seals might have solved the smoking, and the pushrod hole length needed will depend on the total lift. Likely the new cam already had 0.450" lift (a 10% increase in lift over the typical Pontiac cam) and caused problems when the total with 1.65 rockers went over 0.500" lift.
