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As for getting the broken bolt out. I've had great success using a mig welder on broken bolts broken off in aluminum. I simply just arc off the broken bolt and make a puddle high enough until I can weld another bolt to the broken part. If you keep the arc off the edges you won't mess up the treads. The high heat of the welding also helps loosen up the stuck bolt. Sometimes the welded bolt breaks off a few times before you get one that will remove the broken part and it comes loose. This process has worked for 3 exhuast manifold bolts and one caliper bleeder valve.
As for the chipped block. I think I would try the helicoil or maybe a retap of the hole as it looks like you might have enough material there to hold a bolt.
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Woody
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