At those miles you might as well try putting some engine restore in. It can't hurt. Possibly look into a used engine. The 1.8 is really not very popular so it is entirely possible to find a decent one with lower miles for under $300. Figure another $400 -500 to put it in and you're golden assuming the rest of the car is decent. No idea where they got the $2100 from. Having owned a 94 Impreza wagon as well. I'm just wondering how you noticed the loss of pep?