P303 needs new engine?

I've been having a problem with my Windstar 2002. First I had code P171/174. P302 303. The mechanic said that problem could be o2 sensors and spark plugs. After changing o2 sensors (all 4) and spark plugs, 171/174 code did not come up anymore but 302 and 303 still there. The mechanic then changed the fuel injector on cylinder #2. We were left with one code (303) Few days later 302 came up again. After a month of searching for the problem the mechanic told me that there was a vacuum leak somewhere but he did not find it. I decided to take the car to the dealer to find out what the problem was. The dealer gave me an estimate of $106 and then came back with no finding and asked for more time and more tests and $275 cost which we brought down to $225. At the end the dealer said that engine needed to be replaced. I showed the dealer results to my mechanic who was surprised.. According to him the result of the test determine that there was only a leak. Pressure was accepted and there was no need at all to change the whole engine. I'm now confused and do not know who to believe. Here is what the dealer said:
Self tested code P302. P303. Did PPT Scoped IGN. coil.plugs.and wires OK. did INJ flow tested OK. Did relative compression test found #2 13% and #3 11% low. Need to remove cowling to access plugs to do CYL. Leak down.
Did comp. test CYL. #1=170psi #2=130 #3=125. Did CYL leak down test found 70% Leakage past Exhaust valves. Need to tear down and inspect or replace long block due to mileage.
Estimate
parts $4987.93
Labor: 1749.10
What do you think? Could that problem be linked to 171/174 codes although they do not show up anymore?

bigbox

The dealer did the correct tests. The compression test checked that the pressure was low. The leak down test identified the problem. The exhaust valves. Now there final conclusion I do not necessarily agree with. The head should be removed and checked for burnt or bent exhaust valves. If you lived up north with below temperatures for an extended time I would suspect you froze the engine and cracked the head. That being said did you ever overheat the engine and drive it for an extended time? If you cracked the head between the 2 exhaust valves the cylinder would leak the same as if 2 valves were bad. I would say have your mechanic or dealer pull the head and identify the actual problem. The figures he gave would be worse case scenario. Once the head is removed it should be very apparent what the problem is. If not the head is probabley cracked. In that case I would probably wish I was with a non dealer mechanic as you could get a replacement head for alot cheaper from an auto parts store then the dealer.
AutoZone Reconditioned head $325.99

Any noises? Did this seem to happen all of a sudden or over time?

Knowledge is a good thing when dealing with mechanics if you have a good idea of what the problem is and what to expect it maked it alot harder for them to take advantage of you.

Post any more information you have will be glad to help.

Thank you for the reply. I bought the car 3 months ago so I do not know what had happened. The car is ok when driven but when stopped it start shaking. check engine would blink and sometimes car would turn off. I live in California. looks like the car never left California. It has 107K miles.
About the heat, No I never noticed overheat.

Ford does not get inside engines,they do not do teardowns and they replace the engine instead.Sometimes the dealer does not put in new oil,this happened to one of my father's friends and he was not too happy about that.The dealer put in the old oil back in after putting in new rings and bearings,it was a 1989 F150 with a 302.The engine later had to be replaced and one from Jasper was installed.

bigbox

My advise is still the same. Remove the head and see if there is any noticable damage. If not you could have the head checked for cracks. (Magnafluxed) If it is cracked or shows damage then you can go from there. If the valves are burned or bent an auto parts store with a machine shop can rebuild it. Before I would use the head again I would have it magnafluxed just in case. Or just buy a remaufactured head. This is all under the assumption the dealer is giving you the correct info.

I have the same problem.what test did they run.I was quoted $600 just for test......