Since you are getting cured live rock from your LFS, and it's a new tank setup, it's fine to let it cure in the tank. If you maintain circulation, it shouldn't smell bad.
Note that this only applies to cured live rock purchased locally. It's a bit different if you are using uncured rock, or have it shipped in. Even so it should never smell that bad once you get it in the tank. It could smell when you open the box.
As for the sand, you don't have the right amount. Either use just enough sand to cover the bottom, about 1/2 to 3/4 an inch, or got with a 4" deep sand bed. If you go with the later you'll need a total of about 200-250 lbs of sand. IOW, you want a lot less sand or a lot more sand.
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