Putting a used motor in can often save money, depending on how cheap you can find the motor. Your best bet for this is going online, if you type in your state followed by online salvage yard normally you can fing a site that will do a parts request, which will send your request out to all the junk yards in your search area, I normally search by state even on a motor some places can beat closer places prices even whith shipping. About all the work you had done, if the water pump frose there is a good chance the motor did overheat, I would like to know if the check engine light came on and if they scanned it, if so they should have been able to decifer right there wheather or not there was more damage. Normally when a shop does do a water pump they, especially when they then find out the timing belt was blown, they would do a pressure test on it. This all hapened within one trip to the shop right, if so and either way they should have researched to see if this was a zero tolerance motor, while in the same sense if you were going to repair it this would have to be done anyways. However, you should have been inforomed ahead of time and given the choice, because if this is a zero tolerance motot which I am not sure of other work needs to be done, of tearing the head off for inspection as well as sending the head in for pressure test and machining or like you stated replacing the motor. THis does not sound like this shop went through all the necassary steps in diagnosing. Well if you have any other questions let me know, otherwise please remember the experts do not get paid unless you select accept.
If this was helpful to you please select accept, and if you have any other questions please do reply. Thank you Eric