wow, that's some unfortunate luck. get it in good running condition and that thing is easily capable of relatively easy and cheap 100,000 miles....i know it's hard to believe that at this point....but it's worth repairing if you can get it right.
if you replace the transmission - save the center diff (it just unbolts from the rear of the trans) - they're worth $100 and good to have just in case.
more than likely the car had headgasket symptoms when you bought it - and that's why it was sold. so you essentially bought a huge problem, happens all the time with that motor.
transmissions are relatively cheap. if you can do the headgasket repair as you suggested, you can swap a trans.
while you're pulling the lump you can make some of your money back by also buying an EJ22 engine which doesn't have headgasket issues and it more reliable and cheaper to maintain than the EJ25. they can be found cheap usually. then you can sell your EJ25 which has a high demand due to headgasket and lower end bearing failures. you can make a couple hundred back that way and EJ22 timing kits are also almost $100 cheaper. i just did this for a friend - got an EJ22 for $350 and will sell his EJ25 for at least $700 - so he'll make $350 to offset his mechanics installation costs - making it almost a free repair and he gets a better motor.
Edited by grossgary, 22 March 2013 - 08:07 AM.