[A4] Repair or walk away - advice for an Oil Sludge victim?

[CoasterJames at aol.com]

Hello Fans, 
 
I have a dilemma and I am seeking advice. 
 
I have a '97 A4 1.8T (Not Quattro) needing repairs and I need to decide if  I 
should fix it or walk away. 
 
The car's oil light started to come on intermittently.  We minimized  use of 
the car and on our last drive the Check Engine light came on. 
 
I had it towed in.  The service tech at the dealership advises me that  at 
minimum I need to replace the oil pump and related components to the tune of  
about $2500.   However, they can not assure me that will be the end of  my 
problems.  They say there are traces of fuel in the oil and that the  next best 
thing to do would be replace the long block of the engine - to the  tune of about 
$7000 total.  
 
Not at all appealing.  The car is in good condition generally speaking  - 125 
K miles, new timing belt about 10,000 miles ago.
 
I had pretty much planned to salvage the car - but the tech mentioned that  
there may be a mechanic or two in the dealership interested in buying the car - 
 which makes me wonder how bad it really is. 
 
Lastly, I phoned a non-dealership repair shop specializing in imports and  
described my situation - he was not interested in working on it - he said that  
if it is the oil pump, that it is likely the beginning of my problems. 
 
I don't want to sink a bunch of money into the car if it won't even get me  
home after I pay the bill. 
 
Have any of you experienced anything similar with this? 
 
Does anyone out there know of a decent repair shop in the Twin Cities of  MN? 
 What about a salvage yard? 
 
I have until the end of the week to decide what to do before the dealer  
wants the car off their property. 
 
I appreciate any advice - thanks!
 
Jim