Here in the Seattle area, Kelly Blue Book says your 99 OB is worth $7500
(I got $9,260 the second time I ran it ??) (buy at dealer) if in
excellent condition. You may want to run it yourself at
http://www.kbb.com/KBB/UsedCars/1999_Subaru_Legacy_Retail.aspx.
I was lucky when my 2000 OBL blew a gasket, it was still (just barely)
inside the special extended warranty on head gaskets. All I had to pay
for was the cam belt as I had them replace it while they had it apart.
I'm guessing you like the car, so that gives a little weight towards
fixing it.
Trade-in values from KBB without the HG problem.
Excellent $4,100
Good $3,625
Fair $2,825
Subtract $1500-2000 from that for the HG..
If it was me with this car, I'd probably fix it. My reasons:
$1700 doesn't make a lot of payments on a replacement vehicle.
I don't like the later/new Outbacks.
I don't like to have to "learn" another vehicle.
I'd probably end up eating the $600 sound system upgrades I've put in
it. (special case?)
There's a lot of miles left in your car, I've seen some with over 300k
still running fine.
That's me, but I tend to run my vehicles many years. Overall, even $1700
repair bills are OK if spread over many years and miles.