1989 Toyota Cressida HELP! Leaky Head Gasket. After thermo

Engine Cooling problem
1989 Toyota Cressida 6 cyl Front Wheel Drive Automatic 228K miles

Hi, my car always seem to had overheating problem since I purchased 2007, but engine always seemed to be running good. Last summer, car overheated with loud LOUD explosion and huge smoke, when fan cover broke off and fan stopped, radiator fluid leaking everywhere when hose near heater valve (upper back) burst. Had this hose replaced and mechanic checked engine electronically to check for head damage, he said it's fine. Car's been running rough on&off tho since then, lots of vibration& sound at low speed at times, esp. Slow speed, then warmed up or frwy speed it's ok like spark not firing at lower speed and running only on 5-6cyl. I overheated again, this time hose around front lower near thermostat leaked. When fixing, others started leaking (worn-out) changed all hose that hasn't been changed. Few mo later, same area around heater valve, this time hose came off (lost plastic part of valve) while driving, got emergency fix and now bypassed heater valve. Also had fan clutch changed (fan wasn't turning). Seemed evrything well as far as radiator leaking/overheat probs, but engine still had rough shake, etc. At times spark plugs were not sitting all the way in (popped out), friend said this caused vibration, sure when pushed back, running fine. Still had overheating problem, had it checked, fan clutch changed. Ran well since then until couple weeks ago, major overheat again, big smoke after frwy driving 14 miles away. Let it sit @1hr, added water (was dry), headed back, but return trip half way on surface rd, car overheated&stalled when pulling into store. Sat 3hrs, started, but overheat w/in 5min. Had it towed home. Had s/o look at it at home, said maybe thermostat bad, gasket was worn& metal had crack. Couldn't get replacement part that day, so the friend did thermostat bypass (no thermo), saying it wont overheat now. (Recommended dont drive too far!) Test drove around block & seemed fine. Car had trouble turning over in early morning next day when cold, thought it may be because of bypass, so I ordered thermo asap. This morning I went to get parts, same thing. I went to mechanics to try to get thermo put in, together with timing belt I planned on for a while. But mechanic now tells me I got head gasket leak. He opened 1st cylinder to show me water in there, later friend also tested oil cap and there was mayonaise/creme on lid, tale-tale sign.
The shaking, etc probs seems signs of bad head gasket from what I read in these forums now. When friend last tested oil cap, about 1mo ago, it was fine. Now, question is, did my blown head gasket/leak happen because of last thermostat bypass for some reason (too much radiator fluid gushing in and flooded engine)? Or was this happening (getting worn) all along since big explosion last year? Was there something that s/o could catch before it came to gasket problem, or is this merely due to age of engine (almost 230,000)? I know 1st mechanic from last yr's explosion refused to work on my car since then, kept advising me to get rid of the car (I had no money for replacement tho). The new mechanic says he'll fix head gasket for $500 (includes sending to shop to smooth head). Others are telling me it should cost $900+ and be careful of shotty job.
What should I do? I don't have much money to get replacement car, do you think it's worthwhile to fix it for $500 (does the price seem w/in range for "leaky gasket" -- he didn't say "blown")?