My_rex_is_goosed

My car died last week and according to Pip at WGT in Middlewich, my stationary gear is likely to be the culprit. He's based this diagnosis on the noise it made when he turned it over, and the metal bits he found in the oil on draining it.

I think I have three options:

1. Buy a recon engine and have Pip fit it, likely to cost around £2000 all in.
2. Buy a new engine and have Pip fit it, likely to cost around £4500 all in.
3. Sell the car to a club member more technically capable than I, as a project.

She's a winning blue 2004 Rex, with around 55 on the clock. She had new coils, plugs, and leads around 350 miles ago, regular oil changes, and a coolant change around 150 miles ago, and apart from this recent 'hiccup', ran great. I bought her 12 months ago for £2400.

Could anyone suggest any options I may not have thought of, or basically offer me any advice on how I should proceed? I really can't afford to spend much at all.

Thanks very much for any help/advice