I have a requirement from a client who want to store info about engineering diagrams(its location and the scanned copy(pdf)).
They also want SharePoint users to be able to perform searches on the data.
The client is also concerned about what impact storing >=10k rows will have on SharePoint. Most of the list data I've dealt with have been <100 rows and I'm not how this will impact SP.
Should the data be stored separately in SQL server and have SP display it as a list using BCS or CSOM or should it be stored directly in SP lists? Any tips or guidance will be appreciated.
10,000 items is well within SharePoint's supported limits. Consulting MS's Software boundary and limits document ( https://technet.microsoft.com/en-us/library/cc262787.aspx#ListLibrary ) you will see that they support you up to 30 million items per list.
With that said, you at multiple thousands of items in a list you can't blindly treat SharePoint lists and libraries as if they were plain SQL tables. All of the great features and help you get from the SharePoint layer that is placed on top of SQL means that MS has to put limitations on what you can do in order for the product to work properly at scale. I highly recommend that you take a look at Microsoft's guidance for using large lists: https://technet.microsoft.com/en-us/library/Cc262813.aspx If you can meet your customer's business needs while following their guidance than go ahead.