I'm in the NE also and feel your pain.
Yeah, from the pics, i agree, it looks great, but i'd still do a full go over with a screwdriver or chipping hammer. As clean as it looks I doubt you will find anything, but I've also seen em rust in one place and nowhere else. Also, I checked out a rubicon this past week where the guy took pics of the frame and it all looked great. I went and looked and the frame was junk. Skid pulling thru frame, he even used some kind of black tape, gorilla maybe, to tape over a 6" rust hole in front of passenger side rear control arm. That said, the asking price was less than half what the one you are looking at is going for. Buyer beware out there!
I don't dig the flares, and if you saw some rust near them, i'd wonder what they would be hiding as well. You didn't notice any corrosion on top of the front fenders? Rocker panels like to rust too, esp, toward the rear, and body mounts as well.
The smoke thing can be dealt with, replace the carpet and maybe get new seats. You said the interior was trashed anyways. Leave the top off on nice days for a while and it will go away.
The price seems fair. Out here, the prices really come down in the late spring and fall, and crater over the winter, not to mention the general market for TJs seems to have fallen off quite a bit lately. Finding a frame that nice up here is tough, my last one came from Florida and is perfect, but that's not easy to find.
Let us know what you decide!