Wow, that is a tough situation and I don't envy you a bit. I honestly don't know how I would even go about dealing with this...on the one hand, this is the person you love's parent, and it's sad in this day and age how disposable we treat older people. On the other hand, you aren't married and aren't under any obligation to deal/live with your boyfriend's father on a daily basis, especially if the smoking thing will be a big issue. I definitely would never be able to live with anyone who smoked; that would be a non-negotiable for me, regardless of the parent thing or not.

You need to think long and hard if it's worth the loss of privacy and compromising on the smoking to stay with this guy. You didn't say what his feelings were on the topic. I wouldn't recommend thinking about house-buying until you and your guy have a long conversation; now isn't the time to be coy about your thoughts on marriage, from either of you.

If you do go through with it, I'd say try to find a house that has one of those 'mother-daughter' extra apartment style living arrangements. Maybe the dad could find like an assisted living situation that is cheaper than a regular apartment but still close by.

Good luck! I hope it all turns out to be best benefit of everyone.