I certainly would at least spend some money on getting the head gasket changed as a matter of course, it may seem a waste of cash but believe me it isnt, i've a 1999 1.8 in at the moment with about the same mileage needing a new engine due to overheating/head gasket problems, also maybe worth checking the temp sender and gauge and having it replaced, it was another reason the cars were having problems. Owner/drivers werent aware of overheating problems because of dodgy gauges, although i'm pretty sure this was a very very early problem with them.
Like Trev says, go for a TD4 or V6 if possible.
Get back to me asap with the Vin and i'll check if its had any warranty work done on it.
Cheers
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