Sorry to hear about this. Very possible the oil separator could have caused this issue then once it was shut down allowed a cylinder to fill with enough oil to lock it. Assumably and probably best case oil will come out when they pull the plugs. If coolant comes out then you may have bigger problems.
If it is oil hopefully you can replace the separator, suck as much oil out of the cylinders as possible and hope for the best. It will smoke for a bit and worst case maybe throw in some new plugs once it burns off, hopefully they get most of the oil out and it won't do any damage to the catalytic converters.
If you have coolant in the motor then likely you have a cracked cylinder or cylinder head, in that case it is pretty much a boat anchor
So like I said, hope for oil.
Answering your value question is a bit harder, unfortunately even with good motors they aren't worth that much yet alone with bad ones. Mostly due to repair costs and in most cases engine replacement will cost more then the car is worth. If the car is unique/exceptional i.e. an S model with rare options it may be worth saving or worth more to someone who will fix it, but if it is a run of the mill base model then yeah $4K with a bad motor is good money, heck you can buy 911's with bad motors for $5k.
Hope it turns out well for ya~
J
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