If it's really bad, I would return it. I have returned smoky (new) baby clothes from ebay before. They were meant for a gift, and I couldn't give them like that. I never buy fabric now from anyone who doesn't say 'smokefree' in the listing, and when I review a seller, I make sure to say that the fabric was smoke-free. Anyway, I have had very nice people send me smoky fabric in the past, and I am now convinced that I can get the smell out. But, it takes washing. What I do is take the squares and put them in a bowl of water with a small amount of liquid detergent and soak them. Whenever I think of it, I change the water and add more soap (for the soap, I just take the empty detergent cap and fill it with water, so it gets a trace amount of soap). Sometimes I change it for days on end, but eventually, the smell disappears, then I just hang the little squares around to dry, and they're good as new. It's a lot of work for small squares, though! I've tried squirting fabreze in the water, or putting in a dryer sheet to soak in the water, but I don't think they really made a difference as much as the constant soaking/changing water.
Are the 4 inch squares novelty squares, like i-spy style? If so, let me know if you need any more. I'm making an I-spy quilt right now with that same size and have plenty left over.
-Lynn