some smoke is normal on cold starts (nature of the flat 6 engine) but if the AOS is failing/failed, you will see a LOT of smoke for a good 4-5 minutes (think 80's metal show before the band comes out
)
their diagnosis sounds accurate from your description, but I can't comment on the price they're charging as I'm not too sure what's involved with replacing said items
maybe someone else can chime in on that, but hoses (even P-car hoses) can't be THAT expensive. sounds like a hefty labor cost. hoses shouldn't be too hard to replace to be honest, even for a non-DIYer