Don't you have consumer protection laws in NZ? You surely should have a comeback against the seller of the engine, rather than the installers? Doesn't look as if that engine has run for a LOOOOOOONG time?
If money is the issue, (& who isn't it for) then I'd pull the valves & have a good look at the seats to see if there are any cracks which WOULD scrap the head. If not then I'd check how much warpage there was - there probably is some if the gasket had been blown for so long. Again if not too bad to be skimmable, I'd take a deep breath & get that groove filled with TIG welding, then get the whole head skimmed just enough to get flat. While in the machine shop get them to recut the valve seats, cross your fingers & refit the head - shouldn't cost too much if you have already laid out a pile for the engine. - What's the rest of the engine like BTW - bores in particular given the rust in the head, , bearings & seals? Good luck...