Replacing your timing chain will cost you about $60 and 5 to 10 hours of time, and you'll replace the front main(included in the $60) while doing it. It's really not that hard, so, i would definitely consider just doing that if your engine seems OK otherwise.
You might also want to replace the t-chain cover if grooves worn in it by the t-chain are too deep. (what's too deep? i don't know...mine were about 1/16", and i replaced my cover." the cover is another $50 or so. But, you might not need that.
If you do decided to just replace the chain, definitely go with EngnBldr's kit. (You should prolly talk to him if you decide on a whole new engine, too.)
Also, there are a lot of resources to help you do the job yourself. Do a search on this board for +22RE +Timing +Chain, and you'll find all kinds of great info.
4Crawler has great step-by-step instructions on his site at
4Crawler T-Chain Replacement Instructions.
There is also a good article in the Toyota Tech section of this website.
And we'll all be here to answer questions if you have any.
Regarding your oil buildup, is it fresh? Where on the engine is it (front or back or top or bottom or all over)? Do you ever leave drops on the driveway? If not, the front main may have been leaking before the PO had it changed.
I don't think that the t-chain plus oil buildup on the engine is a reason to get a new engine...unless your looking for a reason...in which case it's as good a reason as any. <img src="/forums/images/graemlins/lol.gif" alt="" /> Maybe others will disagree, though. The emission thing might be more of an issue.
Stan