NEVER take a sellers word on how much something should be to replace. He is going to say what ever he can to get that car gone and most of them only give the minimal amount of information that still saves their butt if something goes wrong after the sale.
That may very well be the case to replace the head gasket, but if there are more things to it, like the head being warped because it got too hot, there will be more charges to redeck the block and head. Plus the other internal unknowns that come along with having a car overheat badly. It is possible that it is just leaking and needs replaced without it having overheated, but that is usually not the case with blown head gaskets. Does he say why he is getting rid of the car? Could be that he knows something major is wrong and isn't looking for the expense to replace an engine so he is dumping it on the next poor sap. Happens all the time unfortunately.
It may not be the case, but be fully prepared to replace a full engine. Worst case scenario, because of all the unknowns at this point. If a full replacement is a possibility you are willing to undertake, and the rest of it looks like a good deal to you...go for it.
I personally would pass, too many unknowns and more than I would be willing to dig into. Desperation and/or impatience is the worst way to into buying a vehicle. As you are finding, there are a lot of them out there and if you take your time the right one will come along.
By the way, the ebay engine linked is $700 without shipping included AND they don't even show you the pictures of the actual engine would be receiving. "Sample (stock) photos are shown. You will receive a motor similar to the ones you see in the pictures." <--- I would never buy something that you can't even see before hand. That is crazy that people buy from sellers like this.
So to put that in perspective: say you buy the car for $2200 and the engine is shot. Then you buy one like the one pictured for, lets ball park at $900 shipped. You are now at $3100 for the car plus the install and what ever might be needed. Is that worth it? Not to me it wouldn't be.