2001 Volkswagen Jetta Engine won't start!

Engine Mechanical problem
2001 Volkswagen Jetta 4 cyl Two Wheel Drive Manual 85000+ miles

I took my car to a VW shop "expert" and paid 2 hours worth of diagnostics labor. They called me back and said that they will have to "tear apart the engine" to find out why there is no compression. They are asking me $500 just to do that. Is that a reasonable asking price for that type of job? Also, what could be the reasons for not having engine compression? They said that the timing belt and marks are lined up and there's nothing wrong with them. What else could be possibly wrong? I want to know if simply changing the existing engine with a working engine is a better and cheaper solution than trying to fix the existing one.

Thanks for your time!