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Problems pointing to head gasket...failed water pump fallout on high mileage 245 200 1987

I've just returned from a trip and I've got to decide what to do with my wife's 87 245. Last fall, her water pump failed and she drove it home (about 10 minutes on the highway). I changed the water pump (had to do it twice because my friend put a gasket on incorrectly), and we started to drive it around a little. Then, things began to get difficult. I'm outlining the symptons here - while I think they point to a warped head and failed head gasket (and valve job too?), I want to throw it out in case anyone can (1) affirm my diagnosis about th head; (2) perhaps point me in other directions...

- The car was having trouble starting, and when it did, it was very rough
- Once it warms up, it actually ran quite well
- Inside the coolant resivor had sludge in it and under the cap
- Although the coolant overflow tank cap was tightly on, there sludge markings dripping around the outside of the tank (combustion pressure moving through the cooling system?)
-The car hasn't been driven much at all since September, only started every 2 weeks or so

I don't have as much time to work on this (I teach college and classes begin Monday), but I refuse to pay $1200 at the mechanic. We only paid 1000 for the car. We drove it from MA and has some real rust problems. I'm willing to give a head gasket replacement a go, but would be the most extensive repair I've done so far. Any suggestions, advice, or encouragement?

Thanks as always!
-pu
--
((1992 244, 100K)) ((1987 245, 270K)) San Diego






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