Replacing headgasket is not real a hard job, but sometimes the head is cracked then you need to get a remanufactured head around $500. What I would do is to remove the head and take it to a machine shop to find out what condition it is in, and go from there. Some guy mentioned the block may be warpped but this is new to me, never heard of it happening. It should cost you around $100 to get head resurface and valve reseated, not a bad deal. Also doing a compression test before doing anything is not a bad idea because it will tell you a lot about condition of the engine, normally you should get very close readings on all cylinders except the one with blown gasket. I always consider what is the market value of the car in great condition and never go over that trying to fix a J.....