OK, chapter 2. I found a mechanic who I would trust to do the swap, told him our story. He gave the car a going over: brakes, clutch, steering etc. all sound; and cylinder #1 is getting 2 (two) pounds of compression (cyls 2 through 3 are getting 200lbs). Needless the say the engine light never goes off (it just alternates between being lit and blinking), and we'll never pass the inspection that's due this month.
He recommended a valve job, we trust him, so that's the route we're taking. Looking at $1400 -- probably what a swap would cost with labor. In twelve months we'll have the cash flow to get something newer, right now we need to spend the least possible to get us groceries through the winter.
Thanks for your interest everybody, I'll keep you posted.