Thanks for the lively discussion gen'emen. I have to admit the first two phrases that popped into my head were "money pit" and "time suck". I talked with the mechanic who looked at the vehicle and done a lot of the work on the rig in the past. Turns out, he checked three of the cylinders and the results were something like 20, 20, and 60. Basically no compression. He also checked the distributer and found the rotater isn't rotating. He didn't think it was necessary to check the timing belt to see if it had broke. He told me the brakes and the radiator had been replaced in the last two years and it had had a lot of front end work done earlier this year. The drivetrain was in good shape for the mileage. Turns out most of the driving had been on the highway and some relatively good jeep trails. In the mechanics opinion, the biggest issue was that the engine likely had many more hours on it than the miles would suggest.

So I'm still wondering, given the added information, does replacing the engine on and old Xterra sound worth the trouble?