these guys are right. Any machinist will check for cracks before spending any time on a head. By machining I think you mean that they were just going to mill the sealing surface of the head to make extra sure it is flat. That should not cost very much money at all to do that. Like less than $150. They should not charge you for machining the bad head or they should do the other one for free. thus charging you for only one job. How much are they trying to sell you the used head for?
BTW, this is not a huge job no matter how intense it sounds! It is a relativaly easy procedure that any decent halftime mechaninc could do.
I hope that you will not have to pay too much $ for the whole job, and I hope that you think this whole crew is 100% legit. You would not believe some of the stunts some shops try and pull.
The price of a used head will vary by region and it depends on where you get it from. There are junkyards here where it would be thirty dollars plus a charge to pull it and then there are jy's where it would be $150.00 or more. It all depends on the business strategy of the seller. I do not know where you are located. Heads are heavy so it would be expensive to ship one but the age of your car will make it harder to find, at least around here in the rustbelt. There is this guy Crazy Ray on this board who owns a yard in Wash, DC, you could try calling him and see what he can do at least you will get a feel for the price. It is probably in the phone book under the same name.