Sigh.

So two weeks ago I was driving my 1990 S2 on the freeway when I suddenly
lost some power.
I went from around 100 to 80, and I had a hard time accelerating.  I
immediately pulled off the
highway and heard some noises that weren't right.  I killed the ignition
right there and had it towed
back home.

The verdict: Some water in the number 1 cylinder.  Upon further review, it
looked like the master
head gasket had blown.  I pulled the head and investigated further.  Turns
out there is a chip off
the top of the number 1 cylinder.  There is also scoring of the cylinder
wall.

At this point this is way over my technical level.  My mechanic that I use
for big jobs has given
me basically two options:

1. Buy a used S2 engine and have that installed.  He has said that before he
installs the engine,
he would put on a new head gasket, replace the oil pan gasket, change the
timing belts,
and check / replace the clutch if  necessary.  (I guess it's easier to do
when the engine is
outside the car.)

2. The other option is to rebuild this engine.  This would include machining
all four cylinders,
putting in slightly larger pistons, rings, etc and possibly machining the
heads and valves.

He has indicated that number 2 will be as expensive or even a little more
than number 1,
but for me at this point money is not my concern.  I'm more than willing to
pay for the job
to be done right.

Which brings me to my question:  What IS the "right" way to do this?  Any
thoughts on rebuild
versus new engine?  Pros and cons to each?  Which one is more likely to run
trouble free for
a longer period of time?

All this sucks a.s, but I'm willing to do the job right and ensure many
years of high-speed driving
in my beloved 944.  Any advice here is greatly appreciated.

Thanks.
Scott.