Oil in coolant

Two years ago, my SUV was overheating. I had paid a mechanic (not my regular mechanic) to replace the radiator and flush the system. After I had this done, the heater stopped working. Six weeks later, the truck started overheating again. I took it to my regular mechanic as it was overheating. He filled the radiator with water which just poured out under the truck. He checked the radiator and hoses and said that they were all original, nothing had been replaced. Unfortunately, the mechanic who had "performed the work" had retired.

My mechanic pulled the fluid from the engine, which had oil mixed with the coolant. He said that the reason the heater didn't work was likely that the mechanic had flushed the system incorrectly and it had ruined the heater core. He also said that he could pull the engine and check the freeze plugs, but the labor involved made engine replacement a better option.

Based on the above information, what do you think is likely wrong with the engine and what would be the most cost effective option to fix the vehicle. I've spent close to $12,000.00 on the vehicle since buying it, doing body work, paint, rebuilding the front end (just two weeks before it started over heating again) and restoring the interior and putting a nice sound system in it. The greatest strength if the vehicle was the engine, I purchased it from a mechanic and ran and sounded good.

The worst part us that I spent my daughters life insurance money on the truck after she passed away and so have an emotional attachment to the truck. Any information or advice you can give me would be very appreciated. The truck has sat in the driveway for two years while I tried to decide what to do, as the insurance money was gone and I had to go out and buy a used vehicle at the time it happened as I was working 70 hour weeks and had to have a replacement vehicle immediately. I moved and had to leave the Yukon at a family members house. I've found good work now, but we piled up bills while I looked for work. Thanks for your time.