WTF? I haven't heard of very many cracked 7M heads in the several years I've been active in the community. Sounds more to me like they're either inexperienced with these engines (in which case I wouldn't take it to them anyway) or they simply don't want to tackle the job of fixing a 24yo engine. It does happen, but I can't imagine why they'd just say it outright... Is there more to this? Have they actually inspected the car?
Personally it wouldn't matter, if the head was cracked I'd go to a salvage yard and pull one for $50 and take it to a shop for a cleaning up and machining.
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