[thstone]

At this point, you know that the engine has some type of serious internal damage consistent with the original diagnosis (FOUND CYLINDER 3 WITH LEAKAGE, INTERNAL ENGINE DAMAGE).

The $64K question is how much damage and how bad is it?

I would suggest that any amount of internal engine damage warrants removal of the engine to start a logical and methodical tear down to find what broke, where ALL of the broken parts went, and if there was any collateral damage. This thinking isn't unique to a Porsche, this is Engine Building 101.

The question you need to ask yourself is if you want to take the time and invest the money to learn how to re-build your engine? Or do you simply want to buy a replacement engine, sell the broken motor to someone else to re-build, and get the car back on the road?

Only you can answer those questions but it appears that the expectation or hope of a quick and easy engine repair may not be reality in this situation.