Dear Experts,

Being reliant on professional mechanics to keep my new old van in good
shape, I seek advice for the best options given the following conditions.

I love my van because of the all wheel drive, interior space, and
functionality for hauling my family, youth Cross Country team, building
materials,  outdoor gear, and camping.  Paid  $3,200 to a dealer as
wholesale and  $1,800 on new shift linkage, brakes, fluids change, and
general service.   Total investment in first three months of ownership =
$5,200.

THE VITALS:

86 Syncro
178,000 miles
Good power
Excellent body and interior
Truck handling feels "tight" Nice ride.

THE SYMPTOMS:

Head Gaskets
Exhaust gas in the coolant.
No sign of coolant leaking on the ground.
Some seepage on underside of left gasket.
Red coolant light blinks but occasionally doesn't.
Temperature needle stays stable at top of red diode (barely up from center)

Transmission
No problems shifting, stays in gear
"Rattle" when the clutch is not engaged. Quiet when in gear.

THE QUESTIONS

If the transmission is truly going out, will there be significant warnings
or, can it catastrophically fail.  Do I need to worry about getting stranded
on a 400 mile trip?

THE OPTIONS

1.  From a shop that works out of a home: $700 for gaskets and $800 for new
heads.  No guarantees

2.  From a reputable independent mechanic who told me I need new heads and
my transmission also needs to be rebuilt. Total price $2,000 (trans not
included).  He also did the original $1,000 job for new linkage, rear
brakes, fluids, and I'm not sure what else except that it seamed high for
what I got.  12 Months or 12,000 mile guarantee.

3.  Volkswagen dealer will charge $1,200 for gaskets and $1,000 more for new
heads.  Given the symptoms, mechanic doesn't think the heads need replacing.
12 months, 12,000 mile guarantee.

4.  Sell and look for a 89-91 syncro with lower mileage.