If I were in your shoes, I would be very pro-active in this. If you let the shop or the warranty company 'run the show' and stay hands-off, you won't end up getting things done the way you want. Nobody cares about your car like you do, so you'll need to be firm and pro-active.
The first thing I would do, IMO, is get that car out of that shop asap. It doesn't sound like this shop is concerned with getting your car fixed right, they only care about taking your money. I can bet the price they quoted will probably end up being much more. Find a good shop you can trust and get it there. The timing sucks with your move, amazing how things always happen at the wrong time! You're biggest potential problem is going to be with the warranty company once the car is properly diagnosed at your shop of choice. They can send an adjuster out to verify everything with your new mechanic, and just try hard to fight them to cover the failures.
Sounds like you may have a good engine candidate. Also, check nasioc forums as they seem to have a lot of short blocks and long blocks listed there. Then of course, you can always buy a short block new and have the heads re-finished (shouldn't cost too much, unless they need a rebuild). Hope things start going in the right direction, look forward to pics and hearing of the progress!
*Edit add on...not sure where in MI you are, just did a quick search on here and a place called Pure Tuning near Toledo, OH popped up. It had some good member reviews from the Subaru and Mitsubishi community. (not trying to push anything, or come off that way as I'm sure you'll end up getting it all done right)
Last edited by Serb Legacy GT; 02-13-2013 at 06:48 PM..