@halivie
Please let us know what you do, in the end
OP, you asked for opinions and that’s what you got. You seem to be at odds not only with the opinions here but also those of your mechanic who was hands-on with this car and told you the same thing.
From a financial standpoint it is insane to invest that much in a 17 year old vehicle with 350k miles on it but if you have no objection to sinking that small fortune into it and consider it the proper route to go then so be it. Good luck.
Well to be honest, I think you are just kind of trying to rationalize keeping an old vehicle. If you were a taxi company or somrthing, maybe. I got rid of my Riviera work car at 530,000. I overhauled the transmission at 300,000 just as a PM. It was a sound car and I liked it and obviously fully depreciated and a profit center. My transmission though was only $2200, and I never would have put an engine in it. When I finally got my foot out of the mud and got rid of of it, I realized it was a mistake to keep it so long. All the buttons on my new one worked. It started when I turned the key. I didn’t worry about it stalling and leaving me in the cold at -20. Sure my old one didn’t have rust and looked good but, really it was junk. Did I like $300 car payments? No, but am I really doing anything special now with that $300? No.
So bottom line is I think you are just kind of stuck in the mud and don’t want to change and are trying to justify it on a cost basis. You’re going to have to get rid of it sometime before 2035, so now is a perfect time. How many people pay cash for houses? That’s what budgets are for.
I am surprised that the Ford dealer even wants to work on your Explorer. Most dealer service departments don’t want to work on older cars. The bolts are more likely to be rusted in place. Often, the parts aren’t in the inventory. I had a door that wouldn’t close properly on my 1978 Oldsmobile Cutlass when it was 22 years old and I determined that the hinge was badly worn. I took it to an independent body shop and was told that I would have to bring them a hinge. The proprietor of the body shop said that he doubted that I could get a new hinge and would have to try recycling yards. I decided to see if a new hinge might be available on order, so I went to the Oldsmobile dealer where I purchased the car. The woman who managed the body shop came out and examined the door and said that a new hinge wasn’t available. I told her that I was really disappointed in the dealership and that I had been told when I bought the car from the agency that parts and service would always be available. She looked at me and said, “Well, we didn’t expect you to drive the car 22 years and 225,000 miles”. I didn’t think she realized I was putting her on. She then muttered something about seeing what she could do. She disappeared into the shop and came back with a big body shop technician named Bruce who was carrying a big box end wrench, a big drift pin and a sledge hammer. He loosened the hinge bolts, put the drift pin under the hinge, pounded on it with the hammer and tightened the bolts. The door operated perfectly. When I inquired about the bill, the technician said “No charge–we guarantee these babies for 25 years or 250,000 miles”. Both he and the body shop manager were laughing–she had set me up.
I don’t know how much the OP depends on his car and whether it is an over the road car or just local transportation. For local use, $7000 seems like a lot of money to spend on the car, when $5000 or so would buy more reliable transportation. For highway travel, I would want something with a lot fewer miles and a lot newer in order to minimize breakdowns on the highway.
DB4690, haven’t seen the cost sheet breakdown; I’d asked for ‘general quote’.
3 yrs 36 miles guarantee any ford dealership. 4l, with overhead cam, 4x4, Thanks for the extra effort men, I realize I’m swimming against the tide here…(just recovering from business failure/bk7 two years old now/getting my lips ripped off on our home reifi as we speak; and trying to avoid one more idiot move… I’ll keep ya posted 
@halivie
3yrs/36k at any Ford dealership is a good warranty, in my opinion
There are many sources of rebuilt engines and transmissions out there, but I’d say that few of them would give you that kind of warranty
…Service guy said both come complete in black-boxes, pull out the old drop in the new…
Transmissions are always complete units, as far as I’m aware
As far as the engine goes, it sounds like we’re talking about a crate engine, complete with all the brackets, water pump, plugs and wires, intake and balancer. You might have to swap over the belt, ac compressor and the power steering pump
Also, this dealership is not my hometown dealer…we don’t do our local anymore, haven’t for years… this one is 70 miles away and many of us old timers deal with them from long miles round; very good family dealership…three generations etc. Like my, what did you guys calls him, ‘My indy mechanic’ we have a pretty high degree of trust in that dealership too, always been square with us…
I’ve got to agree with everyone else, putting $8K in a vehicle with 350K miles on it sounds like a poor financial move. If you put the money into something newer and it gets wrecked you can probably recoup a large portion of your money on an insurance adjustment, if the '97 gets wrecked it’s not going to take much damage to total it, then there goes your new engine/transmission and $8K. I have an '88 Ford Escort with over 500K miles on it, but I do my own mechanical work on it, so it doesn’t cost much to keep it repaired/maintained. I can often do repairs on it that if taken to a garage would cost $500-$1K for free since I bought many parts years ago that had a lifetime warranty and I don’t have to pay labor. Having most normal wear parts with lifetime warranty and doing my own work, I’ve probably spent less than $1K on it in the past 10 years. The last 3 major repairs/maintenance (timing belt, water pump/ball joints, tie rod ends/4 new struts) would have each cost several hundred dollars at a garage, they cost me the price of a timing belt (less than $15). If I’d been paying a mechanic for it’s repairs it would have been sold or in the junk yard years ago.
If the transmission is done, why are you putting a rebuilt engine? Why not just replace the transmission only.
I vote for fixing the transmission only and keeping it. It has zero rust and has been generally problem free. I’m sure the engine has no problem doing another 100k.