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2007 Nissan Sentra engine replacement

Hi,

I bought a used 2007 Nissan sentra 2.0s (with 70k miles) from a dealer in WI. Bofore selling they had performed a 120 point inspection on this car.
After using it for a month (700 miles), I observed that the engine oil light is always in ON condition.

So i took it to the dealer and the service engineer found out that there is no engine oil. Then I filled 2 sqt engine oil. after some 3-4 days the light was On again. When took to the dealer, the service engineer did the research and advised me to replace the below components.

Tube seals are leaking and must be replaced
Plug seals are leaking and must be replaced
Spark plugs must be replaced, as they were destroyed by the leaking oil
Valve cover gasket must be replaced

Now he says that still the engine oil is getting burnt and the engine has some internal problem which is causing the oil burnt. And he is advising me to replace the engine... at my cost.

After a lot of negotiations, the dealer has agreed to replace the engine with an used engine.

My questions are -
How this major engine problem was not captured during the 120 point inspection?

If at all he can install a engine from 2006 or older model or a lower version engine?
Is it possible or he has to replace only with a 2007 used sentra engine?
Can he cheat me by installing a older / lower version engine?
How to check that he used a 2007 Sentra engine only?
And how many mileage that engine has on it?

Thanks in advance.
Ranjan
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