Wow that first shop sounds really expensive. I don't even think that GM would charge that much for a crate engine.
Call your local GM dealership. They sell the GM engines at a somewhat reasonable cost, afterall they build several hundred a hour when in peak production. They are not selling the 8.1L new anymore, but still should have many of them sitting around.
I would also recommend finding another shop. Look on Craigslist.com for engine repair. Then call to see if they do motorhomes.
I guess I am really lucky that my 1997 has not needed any large dollar repairs yet. Personally I would disconnect the engine to water heater plumbing, it is really not worth the extra 'free' heat. (they probably already did that though)
Good luck with the repairs, and keep us posted.
Fred.