These are all signs pointing towards it being the head gasket, especially as the "sniff" test turned out positive for exhaust gasses. However that's not to say there may be other issues - for instance the metal pipe that runs along the front of the engine behind the exhaust down pipe and maybe leaks on various other pipes (heater pipes for instance) That's why I'd be keen to do a cooling system pressure check. By the way, if you do a cooling system pressure check and because we are suspecting a head gasket problem here, before you use the starter motor take the plugs out and spin the engine on the starter just in case the gasket problem is severe enough to allow any appreciable quantity of water to enter a cylinder and potentially cause that cylinder to hydraulic lock.
Can't harm to do the dye test and might highlight something for you
Sounds like you've got a real gem in that mechanic! Unless something really obscure is going on here he should be able to give you a good idea as to what's going on. Blown head gaskets are not, thank goodness, something encountered everyday in the workshop but it's something you run into often enough that you get to know what to look for. Also, blowing head gaskets is something our wee FIRE engines are well known for if they overheat - I check the coolant level in ours every weekend to try to catch it early if a water leak should be in it's early stages on ours.
Success with this part of your plan depends on your experience, ability and whether you have the necessary tools. You're going to have to separate the exhaust manifold from the head and the nuts can be pretty stubborn (you may well snap one or two studs) If they bring the studs out of the head with them, don't worry, it's a lot better than having them snap off! Timing belt will also have to be removed and the bolts under the front engine mount can be difficult to get at with only basic tools. Have you used torque wrenches before, do you have a suitable one, or access to same, when the head is refitted? You're going to need an angle tightening gauge too and new bolts (head bolts are "use once only")
As you've got to remove the timing belt anyway you might as well fit a new one on reassembly and, if funds are too tight to afford the tensioner bearing and water pump - which I would do automatically - then give them a spin and thorough check over, especially for any signs of coolant leaks under the pump before deciding to reuse them. You'll curse yourself if you have to take it to pieces again to renew a water pump just a few months later and anyway, if the engine's been hot and/or loosing coolant the water pump seal may be well past it's best.
If you feel he's trustworthy I think you need to let yourself be guided by your mechanic friend. These engines are pretty simple in the "grand order" of the universe and, if he's reasonably competent, or better, he shouldn't have too much bother finding out exactly what needs to be done.
I wish you all the luck in the world and, if you do get stuck in yourself, I hope you don't run into too many problems and, more than anything else, enjoy the experience.
