Thanks for all the replies guys, I am still thinking about the best course of action. I may just leave it as it is and buy another 124 in the spring with low milage so I can take care of the engine as it should be (oil changes at every 3000 miles!) taken care of.
By the way the car seems to have power, accerelates very well so compression should be OK, and the price quoted for the repair is in US dollars. I've been going to this mechanic for the last two years and so far have no reason to doubt his honesty or workethic. The people I have referred to him have the same opinion. So far so good.
Thanks again

Alex