No compression? What were the symptoms? You might want a second opinion. These engines don't usually just loose compression overnight. Unless, did it overheat, run with no oil? Did someone put gas instead of diesel in the tank?
$2000 sounds cheap for a "new" engine. Installed? Would he happen to have one FS?
You might post on the Diesel Discussion Forum. There's alot of good folks there. I'm sure someone in your So.Cal area there can help.

Good Luck,

Dan