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Ramona said..
I would rebuild it.
+1 to, at least, try the rebuild. Diesel engines are remarkably hardy. The economics of repair v replace hinges on the cost and availability of spare parts.
One good reason to repair is that a new engine might need surgery to your engine beds, which could add to the time and expense. My old beds were in a very poor state, and I am still in the process of rebuilding them. Yours might be in a much better condition, and much easier to adjust, depending on the configuration. For more info on my adventures in my engine bay, see here
theboattinkerer.blogspot.com