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If the head bolts cannot be removed from the block, or break off in the block, your mechanic *should* be competent enough to know how to drill them out and fix it WITHOUT replacing the engine.
The problem there is that there will be little bits of metal shavings all over everything, in the oil and coolant passageways, etc. What he's probably thinking is that it would be less work and you'd be better off in the long run with an engine swap. Ask him about this specifically.
Depending on the mileage of the engine, you can probably get a replacement B21FT for under $1000, not counting installation by your mechanic. I'd expect probably 2 times that for all of the miscellaneous things that always seem to pop up when replacing big components. He may want to replace the timing belt, some gaskets, etc etc on the new engine just to make sure everything is good before giving it back to you.
Definitely do NOT put a non-turbo engine in the car. You'll hate it. When you're used to the turbo, you can't go back. Plus, the wiring is all different as is the intake and exhaust. That would probably be even more expensive due to wiring harness changeovers.
Good luck in whatever you decide!
--
~Richard~
* 1986 Volvo 245 DL
* 1996 Plymouth Grand Voyager SE
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