Stephen,

I would change that head gasket now. The engine sounds like it needs
injector work as well, outside possibility of the injector pump, but
it's probably fine. If the engine's got good oil pressure the bottom
end is probably fine, normally, if a diesel is gone it's because of
bearing wear or piston wear, or both. The fact that the engine puts out
black smoke, rather than heavy white smoke, suggest the compression is
good, but the injectors are probably leaking down or not spraying
properly. If you have good compression and good oil pressure the engine
is probably worth fixing. You would be amazed just how many diesels are
replaced because the owner thinks it's gone, when all it needs is a
little work.

If I were you I would check the oil pressure, if it's good, have the
head gasket replaced (check it to see if the head is flat and does it
need to be rebuilt). While the head is being worked on have the
injectors removed and have them checked and replaced or repaired at the
same time.

John