yup you chipped a piston. it happens. you run 91 or higher octane?

yes you can use a old s 2 engine, id swap your lower intake and blower on it for ease of install, and the older engine will most likely need intake gaskets done anyway.

you will need to swap a few other parts to the donor engine as well, (oil pan if your is al) oil filter housing, the alt and alt bracket. and i think you'll want to reuse your injectors as i dont think the older injectors will clip into your newer harness.