1995 Pontiac Firebird Overheating Problems

About 6 months ago my car started overheating a little here and there and my low coolant light came on. I checked the coolant level and it was full. The car didn't seem to be losing any power. When the car was at freeway speeds the temp was normal, when I got into traffic, the car started to heat up. I checked the fan motor and it worked, so I changed all the sensors associated with the cooling system and the fuses. Still nothing changed. I had my radiator flushed, and my oil changed, still nothing. So I stopped driving the car and saved up. About 2 months ago I decided to take another shot at fixing the car. I checked my water pump and It appeared to be leaking. I took it to a mechanic and had that replaced along with the main belt to the tune of $600. When the mechanic called and said it was ready I went to pick it up. I got there and the hood was still up, I asked the mechanic about it and he told me that the car was still overheating. He called over the guy who actually did the repair and when asked was totally miffed about the possible cause. The mechanic then walked over to the car, started it, stuck his nose under the hood and took in a sniff. He then proclaims to me that he could tell by the smell that the head gasket was blown and to do the job right it would cost me $2500 to do it right. There was no smoke coming out of the exhaust, the coolant was not milky or anything, it was orange, which was the manufacturer's specified coolant type. The check engine light was on, but it had been on since I bought the car 3 years ago. I've had no problems before this incident, aside from a clutch. My questions are can you tell that the head gasket is blown by simply smelling the engine with no other obvious signs? Am I being taken by the mechanic? Would it be more cost effective for me to buy another engine? If so, how much should I expect to pay for just the install? How long does it take to change out an engine? Help me please! Thanks.