'99 V70 XC need advice

I have a 1999 Volvo V70 cross country wagon, engine AWDASR (is that right?) that has been at the mechanics for over a month.
It all started with a heater core problem so i took it to the mechanics to get replaced. The next day when i picked up my car i noticed that all the inside was flooded with what seemed like coolant and the oil light when on right as I was leaving the mechanics shop. i turned back around and asked what was going on. The mechanic said that the car was over-heating (from driving it not even a mile?) and that the flooding was from the previous head gasket problem. He had me leave the car for further inspection and one month and 5 new parts later (new: water pump, spark plugs, some belt, other things that my lack of car knowledge doesn't help) my car is still not running.
His final diagnostic was that the head gasket was broken but that in order to get it fixed we would need to replace the entire engine. Really!!?
I don't know if I should believe him or is he just trying to get even more money out of me? I trust that its the head gasket because I was told to check if the oil was muddy looking and it is. But do i really need a whole new engine? I don't know much about cars (well nothing really) but i feel like i'm just being taken advantage of here.