lol... the 3S basically IS a camry engine... will be interesting to see if a conversion proves as reliable.
 
i think the key to mr2's is making sure they're maintained. If you let numpties work on them then things go wrong. the problem is it can be hard to know whos a numpty till its too late, and often when one thing goes wrong it leads to another and another... 
 
eg. my car. (that i know of)
 
numpty 1. doesn't know how to bleed the coolant. engine overheats, does head gasket.
numpty 2. (toyota dealer) tests compression but finds a spark plug is seized, neglects to remove plug or investigate further and claims engine is ok. replaces radiator cap. head gasket leaks water into cyl 3 causing water damage to the bore. engine continues to overheat and warps head. requiring rebore of cylinder, and a new head. (took opportunity to rebore all cylinders and install forgies - as you would)
numpty 3. reinstalls engine and gearbox, uses bolts that are too long to mount transmission and cracks tranny case. slightly bends clutch plate when mounting tranny to engine. timing wire from dizzy is brittle from overheating, snaps, and proves impossible to repair. Replace loom with Haltec MIL spec.
numpty 4. oil light stays on for a little while on startup. numpty checks oil pressure and decides it's all ok and within spec. I drive the car to Tassie to my normal mechanic. finds the oil pump is completely shagged and theres damage to bottom end bearings. bottom end bearings replaced....again. 
 
i'm certain there's been more along the way but i think it's important to get a good mechanic and make sure you stay on top of stuff.
 

^hah funny that I owned a Camry with a 3SFE for many years and my 3SGTE is proving to be JUST as reliable. But then again I don't let monkeys near my MR2.
IMO Camry engines (basically anything with an 'FE' head) are only perceived as being reliable, since they're often mated to a slushbox and not driven hard as there is the usual demographic behind the wheel.  

I agree. Retards can fix Camry engines. Fixing a mr2 engine is a whole different thing. Problem I had is I thought I had a good mechanic but I didn't. Now the 3 times that the engine has overheated since he "fixed" it has properly fu•••d it. So it's rebuild a 2nd gen for $8000. Gen 3 conversion for $7000+ or 2gr for $8000. Where's the smart money in your opinion?

rebuild a gen 2 for 8k!?? using exactly what parts, factory or upgraded?
 
It appears it can be rebuilt for a lot less than that here:
http://www.mr2australia.com/MR2play/tm.aspx?m=69785

Don't blame you for going 2GR. I strongly disagree about the 3S being a POS though. They typically come with little history (in Japan) & were poorly maintained due to the lack of local knowledge (or lazyness overseas). Troubleshooting is typically a biach.  Additionally, they're old now too. Gen2 is also known for having a weaker HG.
 
In retrospect, most of the 3SGTE failures fall under the below:
Headgasket (age, weakness Gen2)
Poor modification (spun bearing, BHG)
Piston rings (age, poor tuning etc)
Cracked block (for the more hardcore)
 
Honestly, the single biggest problem owners come across is entrusting MR2's to big rep mechanics who charge a premium without results.  Compare that to the other issues/motors out there:
 
13B - rats nest vaccuum lines, complete inability to take detonation, even more sub-standard workmanship
SR20 - block (requires nice sleeves), head oiling issues (same with hydraulics) & bunch of other problems known to occur over 300rwkw
4G63 - Crank walk, noisy cylinder heads, connected driveline weakness
B18C/B16A/K20A - no torque + coke can for a block
 
For the record, 5SFE Camry's etc are known to suffer headgasket issues above 200,000km too.

Forgot to mention, Gen2 3SGTE rebuild would be cheapest as you can source the parts yourself & make a big saving. For the $2-3k extra for the 2GR, why not.....

add to that
EJ20 (turbo) - bottom end failure common, spun bearings

Disagree with the 13b comment. I have a s5 rx7 with a 13b Bridgeport with a garret t66 running well over 400hp and I bounce that bitch off the limiter in every gear when I drive it. Try doing that with a 3s.

i disagree about the mr2 engine being harder to fix. it's still a internal combustion engine, the basics are exactly the same as the camry, if a muppet fixes a camry the same way your mr2 was fixed it's still going to be crap.
 
having said that we still don't know what is wrong with your car.
 
what excuses has the mach given as to why it still over heats? you paid 2k for your head to be removed, reco'd and fitted with MLS HG? does it have a HG leak still? take it to another mech for a PK test, simple 5min test to see if exh gases are getting into the coolant system.
 
 

I didn't pay 2 grand for a new hg. I paid 2 grand for a new thermostat. Coolant outlet housing and alot of Al scratching his head and cooking my motor on every test drive after he supposedly "fixed" it.

There I said it. Flame away.