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Seems replacing the engine makes the most sense from a time / $ / final outcome stance. Considering there is some risk even with a replacement engine, but you know the rest of the car well.
Now from the perspective of an enthusiast, upgrading the engine will add to the cost and complexity a bit more than it will add to the resale value, but perhaps not so out of proportikn to the entertainment value. Your call.
I have an inherent mistrust for conflict of interest situations, like a mechanic pricing work on a car that they would like to purchase as-is for their own purposes. Both roller value and cost of engine replacement have a lot of variability. I would shop that around if I could.
And if I had the space, I'd dissassemble the blown engine myself for educational purposes.
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