First, the not-so-good news,
       If you read the Tiico warranty, it says that only parts are covered.
Tiico sells engines.  Period.  Peter did pay for some work for me, but that
was a particular case.  He didn't pay all of it.  I found out later that it
was personal charity on his part.  You can always ask.......

Peter is not an employee of VWSA.  He is a broker.  Think of him as an import
auto parts store, nothing more.

Now, some questions..

Why didn't your mechanic change the oil filter the first time?  Wouldn't he
be concerned about contamination?

Did he perform any tests on the oil coolers?  He should have checked the oil
cooler by putting a loop of hose from one port to the other, filling it with
water, and run the engine to see if the water in the loop gets contaminated.
Easy.  On that same note, he could have put a connector between the hoses
that go to the oil cooler, bypassing and isolating it from the cooling
system, run the engine, and then see if the water gets oily again.  Simple
ten-minute test.  If he has pressure equipment for checking radiators and
heater cores, he also could have checked the oil coolers before installing
them.

Was there water in the oil?

Did the mechanic check compression in each cylinder?  (another quick cheap
test)  Did the cylinders hold pressure?

Did he do these repairs one at a time to isolate which part was failing?

Of course, an e-mail doesn't give all the facts of what transpired, and I'm
no expert, but it sounds like the mechanic got an idea and just ran with it
instead of testing stuff.  I would ask him the above questions before you
start talking price.  Too many mechanics just replace stuff without thinking
or testing.  That is why I am on my third engine block - a mechanic just
'knew' what the problem was, but he wasn't right.

Best of luck.

Bill Marshall
85 GL Tiico (on it's 3rd engine block)
Bradenton FL