[Pretaco]

So the car is currently at the dealer, and torn apart?
Find out from them how much you owe them up to this point, how much to put in a used engine, and how much if you bring them a good block to machine. Also find out what machine shop they use, and go talk to them about what exactly is wrong with the block. If the machine shop is in house, take the block and head to an independent to get another opinion, unless they show you something obvious.

I worked at a dealer for 6+ years, and this kind of thing is way too common. Unless the engine was pinging for years, or you drove on a bad headgasket for 6 months or more, there is no reason the block should be bad. A good machine shop should be able to bore it over, and deck the block which will repair 90% of what makes blocks bad.

This whole situation sounds fishy to me.
They could be trying to get you to trade it in, the mechanic might think he can convince you to sell it to him cheap, or some other agenda is going on.