How do you know the extent of the rust in the cylinders? Is the head off so you can see in there? Have you pulled the drain plug to see what comes out? Is the engine stuck? If you don't have one I suggest you get a shop manual and try to "overhaul" it yourself. If you have the necessary tools, space and skills. Buy/rent/borrow a cylinder hone and clean up the cylinders. Clean them thoroughly of all metal particles. Properly install new rings, put it back together and see if you can get it running. You may be surprised. Seriously the $3K quoted is NOT out of line for a pro-job. Good luck!
