Your concern is commendable. Yes, the parent's smoking could be the cause, or if not the original cause, could certainly aggravate it. Cigarette smoke is more of an irritant than an allergen, but the end result, lung disease or impairment of lung function, can be the same. Many of the products of cigarette smoke are transmitted to the fetus in utero, and infants whose mother smoked during the pregnancy have a much higher incidence of asthma and other respiratory diseases and may also have more poorly developed lungs. Thus this child is at risk from both present exposure to smoke and exposure during the pregnancy.
The exact nature of the infant's respiratory problem would best be determined by her pediatrician or a pediatric lung specialist. Whatever it proves to be, it will almost certainly be worsened by continuing exposure to the lingering effects of cigarette smoke. The likelihood of their causing harm to the baby should be discussed with the “bio-parents”. That discussion could be more effective if the opinion of her pediatrician or lung specialist were part of that discussion.
We should not assume that the ongoing exposures you describe are the only cause of this child's recurrent "tracheal spasms". That will be up to her doctors to determine.
Finally, the “bio-parents” should be informed that their refusal to correct this situation could result in alteration of their visiting rights.
Good luck.