Head Gasket blown, but not fogging from the tailpipe?

Hello all, the car in question is my old reliable 1988 Celica ST, 3S-FE ATM. Last Friday, the hose from the heater valve to the pipe blew, and the temperature gauge peaked to the red line, I was able to shut the car off, and let it cool before it got into the red, but just before. Replaced the hose, new clamps etc, and have been eyeballing the water in the radiator and the oil, and so far, there's no mixing of the two happening.

However, I'm still losing coolant. There doesn't appear to be any steam coming out of the tailpipe, or antifreeze smell out of it either. However, I noticed that by the Water Outlet on the driver's side, it's leaking from between the head and the block. Not pouring out, but enough that I have to add about a cup of water to the radiator every 100 miles or so. The engine has 271,xxx miles on it and honestly still runs really well. I'm evaluating my options, I'd be happy if I could just fix the leak, but I have heard that you don't put a new head gasket on an engine with as many miles as mine has on it.

She's my only car, and my way back and forth to work. I haven't done a head gasket before, and am really worried about it. So, I'm seeking advice on how to proceed, what you guy's opinions are, etc. If you were in my shoes, what would you do?

Thanks for taking the time to read my post, and chiming in.

 

Thanks for replying ST165!

Yes sir, I can see it coming out from where the block meets the head. I scrutinized the entire repair area, checking clamps, wiggling hoses, etc.
It's not coming from the water outlet area, but underneath it a few inches and to the left. The coolant pools in the square shaped ridges on top of the transmission.
I had initially thought that it was perhaps the water outlet gasket, or a broken heater valve outlet since it's plastic and all, but no dice.

I found the leak after killing the engine. I popped the hood quickly, and there it was, right on the corner where the head meets the block(4th cylinder I believe). It bubbles, and drips out slowly, especially after I kill the engine and the pressure builds up.
Went to get her inspected today, and she failed for the first time ever in the three years that I've had her. Usually, she passes with flying colors, way under the limits here in Texas.

For all intents and purposes I live in a sandbox. Literally, I'm in the desert with nothing but sand, cacti, snakes and centipedes. If I had a shop, or a garage or someplace to work, I'd seriously consider doing the head gasket myself just because I love my old car, and I'd take peace of mind in knowing that she was repaired correctly. I'm just afraid of all the sand getting into the engine, so I took it to a machine shop today, to inquire about how much it would cost to replace the gasket.

The guy told me $500.00. Not sure whether that's high, or low as far as price goes. But he said after looking at the leak, and checking the tailpipe for billowing smoke, to try a bottle of stuff called Blue Devil.
Went to the O'reilly's here and bought a bottle of it ($63!!). I haven't put it in yet though. Figure I'll try it out tomorrow after work. I find it hard to believe that a bottle of anything can cure something as serious as a blown Head Gasket.

As it stands, I'm torn in three different directions. Buy a torque wrench and have a go at her myself, try to find a junkyard 3S-FE and someone to put it in, or take it to "Nacho's Machine Shop". Yes, that's the shop's real name. All my friends and family say to buy a new car, but I'm not having it. She's been awesome to me since I've owned her, and to do any less for her just wouldn't be gentlemanly. I get almost 40MPG, and for a 24 year old auto, that's pretty damn sweet. Of course I rarely take her over 55. As always, any and all input, opinions, etc are very much welcomed.

Also as an aside, the taillights you sent me worked perfectly. As a bonus, I haven't had to buy light bulbs for a year now, because the all the ones you left in the them when you sent them to me.

 

Thanks for the input guys. The Blue Devil worked, somewhat. The block isn't leaking by the head any longer, but it still freaks me out, so she's going to Nacho's on the 19th or so. Until then, I'm taking it easy on her, keeping her under 2500RPM. After the head gasket is done, I'm immediately flushing the cooling system with some of the prestone flush. The Blue Devil stuff will leave a white residue where it's leaking, but for lightly blown head gaskets, it might buy you some time. I wouldn't keep it in there 24/7 like the company suggests, but if you're desperate, broke, and have to get to work, you might consider it. If your engine is fogging mosquitoes though, I don't think it would work.

 

Update:
The BD is still holding water, all coolant hoses have more pressure in them than I've ever seen on my car before. Kinda worries me, they're pretty hard when hot. I'm looking to get a used 3S-FE put in. The fellow I talked to today said that he can get the whole power train (Eng/Trans) installed for about $700.00. Says the engine will have 75 to 100k miles on it. I'm thinking about going this route, and rebuilding my car's old engine. Current transmission is fine, as far as I know. So spare parts, and the chance to rebuild my old engine. Sound like it's worth a little more for the experience of doing that alone, to me. So far I still drive her about 60 miles a day, 6 days a week. I'll say one thing for these cars, they're tough! Might not blow the doors off say a turbo neon, but will damn sure still be driving when that neon is quietly sitting in the drink holder, resigned to it's new life as a Dr. Pepper can.

 

Gah! You had to say More Power, Stig! I rarely ever get into red light pissing contests, but I have to admit, it would sure be nice when the Hondas with the fart cans rev next to me. Is it a direct drop in replacement? Color me very curious.