Yea, Sorry to hear about the engine. Been there and done that also. Have blown the engine many years ago and had the jeep dealership put in a used engine. The jeep was an 88 and 4.0l engines were scarce years back. I was out of state when the engine went and 200 miles from home.
The installed another engine, ran the vehicle for 2 weeks to make sure everything was good and cost $2000. Maybe 2 months later the head gasket went. Could not take it back, complain to the junk yard, dealer said the engine was used and would have to deal with the seller of the motor. THis also happened to the car I got for my daughter, engine blew, replace with used engine , head gasket went a year later. Another $1200 to replace head etc. My best advice to go with a reman. engine with a 3-5 year warranty. Like the oil commericial, "you can pay me now or pay me later" Spend a little more now and get a better engine or take the chance and do it again later.

 

I'm in a similar boat. My 93 cherokee has a bad tick and it looks like its the engine bearings. The previous owner thought jeeps were impervious to everything even physics so he didnt take care of it. :/

So what am I going to do? Well I think a brand new factory engine is needed. I only payed two grand for my jeep (and for some reason the previous owner decided it needed a brand new 700 dollar sound system not an oil change or new u joints or anything) So, in my backwards way of thinking, another 3000-4000 dollars is ok to spend on it, because everything except for the engine in my jeep is in very good condition (minus the u joints but im getting those fixed next weekend for free) and chances are I wont have to deal with a broken vehicle again for a while after I have a new block dumped in it.

The problem with pick-your-part stuff, is well... its unreliable, and 99% of people cant even rip parts OUT of the junked vehicle in the first place, none the less just "throw in a new engine block" like its changing the empty roll of toilet paper out for a new one! I doubt a shop would let you bring them your own parts anyways.

 

That is a good point... In my area, any Cherokee that goes into the junk yard gets turned into a junk yard truck and they get the crap beaten out of them... If you get a new engine, you know how it was treated before you got it... I think that 3500 is a little too high though... I found one somewhere that was 1700...