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I suggest that you do compression and leakdown tests to determine what problems with the current engine you really have.
$3500 is approx. what we would charge for a stock rebuilt engine including the core charge. But we essentially never do a stock engine as everyone who is going to go through the trouble and cost of a completely rebuilt engine wants something better than stock, so we typically add upgrades for reliability, smooth running and power.
Be carefull in making rebuild cost comparisons, as they usually don't include the same work. Even our stock rebuilds have some work that some don't do even on race engines.
And yes, you can use a FI engine. The only difference is in the head and the injector holes are easy to plug.
J Parker
V-performance.com
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