A sequence of events that would make sense is that the vehicle was severely overheated, and the head warped to the point that the cam seized in the head. This will cause the belt to break sometimes if it's an old belt, or to shear off the teeth if it's a fairly strong (or under-tensioned) belt.
Another possibility is that the people have no clue what they're talking about and for all you know the head gasket leaks so bad now that they filled up the thing with water and hydrolocked it and bent a rod.
Either way, the engine sounds like it's toast. If the rest of the car matches it, I'd run far far away. If the car is actually really decent, it would probably be worth it to find an engine, but chances are that it needs a lot more than that and you'd never be happy with it.
If on the other hand, it's actually a 760GLE with either the B28 V6 or the diesel 2.4 turbo-6, I'd change my address and phone # and hide from the seller.

It's a parts car.
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Rob Bareiss, New London CT ::: 86 244DL, 87 244DL, 88 744GLE, 91 244: 805K total