Ara T.,
In California cars subject to the smog test you can't put in an engine older than the car, so a 1976 engine in a 1978 car isn't legal - it might not have all the 1978 smog control devices it would need. This definately is applicable in your county, Sonoma.....
The smog inspection places won't take bribes, because it would be a criminal offense, huge fines, ($10,000 I think) imposed and loss of their smog license, maybe their shop, it's just not worth it to them
www.smogcheck.ca.gov is as good a place as any for you to start. Be sure your car is street legal, the DMV will have the regulations for you to check...
I don't blame your friend for wanting to ditch the emasculated 403 engine and go for the 455, the 403 was known as the "stationwagon engine" that was in the Caprice, Bonneville and Olds Custom Cruiser wagons back then. It was way underpowered for all that displacement, and loaded with emissions controls that robbed it of power and economy
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1991 560 SEC AMG, 199k <---- 300 hp 10:1 ECE euro HV ...
1995 E 420, 170k "The Red Plum" (sold)
2015 BMW 535i xdrive awd
Stage 1 DINAN, 6k, <----364 hp
1967 Mercury Cougar, 49k
2013 Jaguar XF, 20k <----340 hp Supercharged, All Wheel Drive

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