Assuming the shop is competent and honest, a 2.5 crate engine with a warranty can be purchased easily for under 2K. Labor for repairs can quickly surpass replacement cost if all the faults aren't known and planned for. If the vehicle is not a worn out rust bucket, it could be worth the investment. If the engine still cranks over, it is not locked up and the shop either used the wrong terminology, are incompetent, or dishonest. Over heating is never a good thing, but it is also not always catastrophic. How many miles? Were you happy with the power before the failure? If it were mine, I'd want to know exactly what failed. It sounds like it is a new to you Jeep and it may have had some serious ills prior to purchase. How many miles on that 2.5? If you were happy with the 2.5 power, save your $ and stick with that if it serves your intended purpose. Wars were won with 4 cylinder Jeeps.
