2001 Volkswagen Passat Twice Failed Engine Oil Cooler?

Engine Cooling problem
2001 Volkswagen Passat 4 cyl Front Wheel Drive Manual 68xxx miles

After my oil pressure light went on I promptly took the car to a Firestone near my house. They diagnosed the issue as a failed engine oil cooler and told me I needed the cooler replaced and my radiator flushed (several times) to the tune of $900.

I had this work done and had no further problems until recently when the check engine lite came on.

Took the car back to the same Firestone. They said they thought maybe I needed a new engine and that I should take it to the dealer. Had AAA come get it a tow to the dealership.

At dealership they told me: oil cooler failed and oil in coolant system. Suggested same set of repairs (and clean out of radiator) that Firestone performed a few months ago. Plus they said low oil pressure due to sludge. Engine would need a de-sludging. Total estimate : $1400.

I called Firestone, they said they'd redo the repair for free (after I applied some pressure), but I don't think they can do the engine de-sludge.


My questions:

1) Is it safe to drive this car any distance? How about after the cooler replacement and radiator cleanout, but before the de-sludging?

2) Is there some other culprit causing my engine oil cooler failures? I'd really hate to have the engine oil cooler replaced a third time.

3) What is the likelihood my engine is already significantly damaged?