What Would You Do?

[dghii]

So lets do some math...
Your car isn't worth much with an undiagnosed, potentially scary engine related problem. Anyone considering purchasing your car would be thinking engine r/r, which makes you're car worth ~$3K, not taking into account your salvage title.

If you are confident in the condition of your car, less the motor, look for a decent used motor that doesn't brake the bank. As mentioned, you might be looking at $4K parts and labor if you shop around a bit.
Discount whatever you paid for the car down to zero. You are into your car with a replacement motor for $7K.

Or...
Sell your car as is. Hopefully you can get $3k..might be less. Lets say you get $2.5K. Buy your mechanics car for $11.5K. With tax you're in for $12.3K. After your $2.5K down payment from your old car, you are in at $9.8K for a newer car with new or rebuilt mechanicals. Not bad!