While it *could* be a cracked cylinder head or a warped head, a head gasket failure is the most common culprit given the symptoms. Replacing the head gasket is significantly cheaper and less involved than a full engine replacement.
Before committing to head gasket repair, a mechanic should:
* Pressure test the cooling system: This will pinpoint leaks.
* Inspect the cylinder head and block: This will determine if they are warped or cracked. If they are, repair is more extensive and potentially more expensive than just a head gasket.
In short: Get a professional diagnosis before deciding on a repair path. Replacing the head gasket is likely the best course of action *if* the cylinder head and block are not damaged, but a mechanic needs to assess that first. Continuing to drive the car with water in the oil will cause serious and irreversible engine damage.
