I'll play devils advocate and say the two mechanics, while they aren't giving you the news you want to hear ($$$), are giving you good advice. It doesn't make sense to spend $2-3k and still have an engine that has had water intrusion by maybe two sources for an unknown amount of time. You would just be POd late when the engine didn't live very long after repairs.
If you can find find a local shop that understands marine engines and can get yours or similar rebuild (with correct marine cam, gaskets and freeze plugs) for $2k may be your best bet.
What condtion is the rest of the boat , is it structurally sound and the interior is good ?