Yes the bald spot is scar tissue, I'm sure. Grafts will grow in scar tissue, though not as densely packed as normal tissue. Therefore you may need two small transplants to get the coverage required to adequately cover the area of scarring.
I can't comments on your observations when you stopped smoking. There is no evidence that your situation has been the situation of others of than the suggestions that smoking can increase hair loss
Most probably you have a androgenetic type hair
loss. I dont advice to use finasteride because of
possible side effects and being under
the necessity of using that chemical for almost life long to stop hair
loss.You would better planning to have an
exam at hair loss...