Volkswagen: 1991 Passat, red flags, oil leakage

Question
Dear Robert,
I have a 1991, 16V, automatic Passat with 201,000 km.
For the past few months it had been appearing to gasp for air, threatening to stall whenever I came to a stop unless I shifted to neutral or got underway promptly again. This problem persisted despite the dealer having changed the distributor having reported that the old one was "cracked" and therefore the source of the gasping. Thus, I returned the car to the dealer within 3 days, and after adding almost a qt of oil. They replaced a distributor gasket (on warranty) warning me to return in a month's time to check for oil leakage. This symptom would require changing the distributor cover also. At this time the technician asked about the timing belt. I told him that it had been replaced 5 years (71,000 km) ago and that it had been inspected recently.
When I picked up the car again, the engine worked better than it had in a long while, but this lasted only 2 days, then the engine died on the Friday before Christmas. I was driving in traffic at ~30 km/h against only a mild incline. There was no loud bang or shaking of any type when this occurred. Simply, the oil warning light flashed briefly followed by the battery warning light. I had the car towed back to the dealer.
The new diagnosis was that the timing belt snapped damaging the head and who knows what else. A few days later I returned to the dealer to retrieve papers from the glove compartment. The car was parked in the same precarious spot in the dealer's lot where the tow truck had dropped it off.

My questions are:
1. Is it reasonable that a timing belt snapped after only 71,000 km of its recommended 95,000 km service life and just 5,000 km or 5 months since the timing belt condition was checked by the same dealer as part of an emission control maintenance without raising any red flags ? I suspect that this was either not done properly (or not at all) during the maintenance, or that the timing belt is not really broken now in light of #2.
2. If there was no loud noise or rattling of the car when the engine died, is the belt really gone,? and if it is, is the damage very extensive ?
3. Could work on the distributor precipitate or cause the alleged timing belt issues ?

At this point I cannot decide whether to repair the car or get something that is more energy efficient. However, before all this, I was getting better mileage than 25 mpg, and I have replaced quite a few expensive parts on the car within the last two years. I fear that junking the car now would be wasteful at the landfill. I look forward to your reply, and your advice is greatly appreciated in deciding what course of action to pursue next.
Sincerely
Fred

Answer
A timing belt inspection will only tell you if the belt is in poor condition and needs to be changed right away.  If it looks fine there is no guarantee that it won't break soon.  While most could easily work beyond the recommended service life, statistically, some will break early.

When the belt breaks, the pistons and valves get out of sync and the valves stay extended while the pistons compress.  The pistons have so much momentum that the valve shafts buckle.

The easiest way to tell if the valves are gone is to crank the engine.  If it spins rapidly without any hesitation, they are bent.

Repair will be expensive.  If piston damage is minor, you could try installing rebuilt heads.  You may be able to find a rebuilt or low miles used engine.

Rob

PS-  It's highly unlikely that the ignition work caused the timing belt to break.