Thanks for the replies. I'm going to keep looking for a cheaper engine alternative (odds are pretty good that the combustion chamber is chewed up too so we'll likely need heads as well). Time is a severely limiting factor unfortunately, she needs the car for work so it can't be down for more than a weekend. Otherwise I would do exactly that, I do prefer to have a positive diagnosis before diving into something like this. But if I pull the heads on a Saturday and the cylinder is as brutalized as I'm certain it is, there's no way I can then go and get an engine and swap it in within the rest of the weekend. And I can't think of any situation where there could be minimal to no damage, the spark plugs show that there is definitely metal flying around in the cylinder, and now that it's developed a knock it's pretty hard to believe there's nothing wrong.
