Very interesting thread, Mark!
As I read through it, I too was in the “just smoke it” camp right up 'till the end. I guess I’d weigh the value of honoring the presumed thoughtfulness of the giver with the “cost” to me of having a few (likely) poor smokes + having to maintain the ruse. Now however, I think if I were you, I’d keep it (hey, at least the person knows you like pipe smoking), but instead of smoking it I’d repurpose it as a “Q-tip holder” (for pipe cleaning), tamper-holder, or something like these. When the cheapskate next sees it, you could sneak in a suggestion for a new gift idea in-line with his/her budget that you might actually appreciate --- such as more Q-tips/pipe cleaners (yeah, these are a back-hand slap), OR a tin of some tobacco you actually smoke (assuming s/he lives near a B&M).
Of course, the latter idea is actually the only one that won’t likely offend AND will also perhaps result in getting a person who won’t spend north of $9-10 to get you something you will genuinely like.