Oil in the radiator

I have a 1994 Nissan 4X2 Pickup truck, 4 cylinder, king cab XE. I bought it new and it now has almost 120,000 miles. I have had almost no problems with the truck over the years, except for normal maintenance. Though a little worn inside and out, it has been a great little truck, until now.

Yesterday, I took it in to get serviced. I usually take it over to the dealership. I have always gotten good service and fair prices with the staff I usually see. Within a short period of starting to do the service on truck, they pulled me into the shop to show me the radiator fluid being drained and there was a significant amount of motor oil mixed into the fluid that was coming out.

I was informed that the likely cause was one of three things: a cracked head, a leak in the timing cover, or a damaged block (the least likely of the three). I was informed that whichever of these problems it is, it is going to get worse in the coming weeks and months. The problem would involve pulling apart the engine to make a determination. He told me the only way to fix it is to either get a new engine or find a private mechanic/shop that can rebuild the engine. I was informed in either situation, the cost (parts and labor) would likely start at $1600 for a rebuilt engine and a new engine would be $3600.

First, I want to get other opinions of the analysis of the cause and proposed remedy. If it is true, that is more that the truck is worth (if it were mechanically sound) and I think I will likely opt to sink the money towards getting a new or newer model truck. However, I would like to get other opinions before I go that route.