Toyota Repair: 22r engine problems, water leaks, salvage yard

Question
Hello Ted. i have a 1987 2wd shorty pickup with a standard carb'd motor, it has 230k miles on it and has ran reliably until now. Its been using 1 litre of oil every 3 to 4 weeks for the last year and also uses a lot of water. The water in the rad was brown ,and muddy for a while but got that repaired, and the mechanic said the motor really needed reconditioning in a years time.  Well, today, it started firing on 3 cylinders, i changed the distributor cap, rotor, wires and plugs, but to no avail.As i changed the plugs i noticed qiute a bit of oil in no3 cylinder, i think this could be the main problem. The oil and water leaks do not seem to have an outlet and there is only a hint of blue smelly smoke from the exhaust on start up, only for a second. It has ran fine for the last year or so since i bought it but does seem to have little power. Highways are done at 55mph as i dont want to push it , also i live in mexico so the mechanics are very much unreliable, i am therefore asking what you think this latest misfiring could be, and also is it worth completely overhauling the motor. I had a price of 1400 dollars to do this which i thought was too cheap and dodgy considering the quality of workmanship down here.  Any advice or help will be well appreciated and may i thank you in advance of your reply. Gracias and adios.

Answer
The compression of the #3 cylinder is probably low due to worn rings, so yes, I would say it's probably tired and needs to be either overhauled or replaced, you may also consider trying to find a used engine from a salvage yard that specializes in japanese engines, I don't think you will fid any in Mexico but I think you can probably locate one in San Diego. Or, you could sort of patch this engine up by removing the cylinder head and having new rings installed and maybe grind the valves.