Presumably, if the thermostat has been bad for a while (stuck in the open
position) then in cold weather, you will constantly be pumping cold coolant
from the radiator through the hot areas of the head and block. Over time,
the metal in the engine will flex and crack, particularly if it happens over
The car never overheated, because with the 'stat not closing, the radiator
was able to work at peak efficiency constantly. As for the "check engine
light," if you were getting coolant in the oil and cylinders (after the head
cracked), perhaps the impact on combustions was enough to trigger your
emissions sensor (I don't know how they work).
I don't blame you for being irked, but $2000 for a new engine (hopefully its
new, and not rebuilt or used) doesn't seem out of line. If you'll be
keeping the car for a long time, it might be worthwhile.