Antifreeze mixing with oil

There are two possibilities on this and they are related to time. If you checked the oil say once a week and one week it was clean and the following check it was contaminated with coolant I would say you could flush the engine and see what happens, in that case the coolant would not be a good thing but it may not have had time to do damage (newer coolant types will eat the soft bearing metals like candy). If on the other hand you are the typical owner and change the oil based on mileage or the oil life indicator, the coolant may have been in there long enough to cause major problems, especially with the newer more complex engines used these days. Plus from the shops perspective they may look at replacing the engine as the better long term solution because they do not know for sure which owner type you are and they do not want you to leave with a repaired engine that is actually damaged enough that it fails very soon. For that alone I would opt for replacement.

Now on your side you need to consider the miles it has on it, what condition the body is in. Is it paid off, what is the rest of the drive train like, would you opt for a used or re-manufactured engine based on those items?

You could also ask him what he found that made him rethink the repair or replace ideas.

Being a Ford dealer tech I see these all the time. If you changed your oil religiously, and check the oil regularly like it sounds that you do, then I would not replace the engine and just have the water pump repair done. I have seen these engine go well over 300,000 miles when maintained properly.