After reading through the thread again:
1) There are several reasons that would allow you to reclaim tax, but from your info to hand it seems only scrapping the car would apply. See here for more info
http://www.citizensinformation.ie/e.../motor_tax_and_insurance/motor_tax_rates.html
2) Scrap value of the car to a breakers is only a couple of hundred if you find one that wants it... else it is only the value per weight for scrap metal which is maybe €100 as the scrap prices are very low at the moment. Going through a breakers either way will not see you back a grand to make up to the 2k you mentioned between tax and scrapping.
3) Only way to get anywhere near a grand back is if you scrap it yourself (as per Lynx's post). Demand for parts is low on these though as not too many out there... not too many bits go wrong on them except the engine, but that of course is the same issue you are having.
4) So, if you are looking at disposing through a breakers your best case scenario means recovering maybe 1200-1400, or else maybe 1100 minimum (including the motor tax refund)... A similar amount would be got trading it in on any 2008 or newer car as it stands with a whole lot less hassle.
5) Taking that cash plus the €3k to put yours right gives you a working budget of €4k for consideration on a replacement vehicle. What would you be able to buy for €4000 that you would be happy with and would meet your daily motoring needs?
Do you need AWD (snow / roads to get to mountain bike trails / etc)?
You mentioned you need space for the bike... Alfa or MR2 will not give you that, so that does mean looking at another daily.
Also another reason for another daily is indeed the insurance uncertainty you mentioned. Insurance companies on normal daily cars are very difficult now once cars are over 10 years old. No bother for classic cover or 2nd car cover on an older machine, but as your primary car insurance companies are putting up loads of roadblocks. It is mental and if our government and regulator did their job this would be addressed - but hey, currently the situation is not good if you want to insure any car as a daily that is more than 10-12 years old... so imagine a 19 year old "performance" car (yes 2.5L would surely see it marked as such).
6) The proper fix will set you back 3k, but will give you enough headroom to up the power to give you a very nice bus with space for your bike, AWD, decent enough handling and serious pace. Keep it for 2 or 3 years and you would still get the same money back as scrapping it today -- and probably more as the built engine would be worth that alone. Buy any other car out there for 4k as another daily... and you will loose similar money in depreciation over that period.
Summary:
a) Financially over a 2-3 year period there really is no difference (well maybe in tax and fuel costs depending on what you buy).
b) Financially today... there really is no difference (spend 3k on replacement or fix).
c) If money is taken out of the equation as per a+b... it comes down to:
- DO YOU LIKE THE FORESTER?
- DOES IT MEET YOUR MOTORING NEEDS?
- ... AND HOW MUCH WOULD YOU LIKE IT WITH A RELIABLE 260-270 BHP AND HEALTH TORQUE INCREASE?
Alternatively buy a cheap car for a lot less than 4k that meets your needs... but that is either going to have issues too (cheap for a reason) or it is not going to meet all your motoring needs.