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I just bought a 97 Wrangler 4.0 V6 with a blown engine (got a good deal thankfully).
Engine shop is offering an in-line 6 with 65,000 miles from a wrecked jeep for $1,800 (parts and labor) or a rebuild of my engine (or use of another rebuilt they have in stock) for $2,200.  
Friends' opinions vary between the two.
Is there anyone out there that can clarify this and help me make a decision?
Thanks!    

Usually shops will not cover labor if a used engine is faulty. This could leave you with additional labor charges if the used engine has problems even if the engine is covered. Some rebuilds will not have the engines balanced when replacing pistons if the pistons are replaced at all and not just reringed and deridged. The heads may just get a valve job or just resurfaced and not address the valve guides or the rest of the valve train at all so you may need to ask alot of questions as to what work will be performed on a rebuild. What happened to your blown engine?