Followup: Just got my car back tonight and had a decent amount of work done. Bottom line is the heads were just fine. Bad news was that the machine shop fees were $300, but overall, I think I came out ok.
I was told that it was quite obvious, after pulling the heads, that the gaskets were going. I'm not sure if the mechanic actually said that both were going, but it was confirmed that this was the source of the problem. I talked things over with the mechanic and here is the list of what was replaced/done:
head gaskets
heads machined
front and rear seals
valve cover seals (whole kit)
plugs
water pump
clutch
timing belt
thermostat
intake manifold gaskets
radiator flush
I think that is about it. I'm not a mechanic and may have misphrased something, so forgive me or correct me!
Overall, I am very please about all of this. Not that I'm glad that the HGs went out, but glad that no permanent damage was done and glad that I was able to take advantage of this and get a lot of preventative work done. The final bill?? $1922. I think that is a damn good deal considering the $300 machine shop bill and all the parts. They used as many Subaru parts as possible and put in good plugs - $15 apiece. The labor was just over $600.
Now, once I get new spark plug wires, a new front left axle and maybe a new PCV valve, she will be good to go, spare routine brake and suspension work.
I think I've got a driver now that will last me a while and a good shop to keep it on the road. 136,300 miles and counting.
Thanks everyone,
Kingmc