How much of that is for parts and how much for labor?
How sure are they that it is a cracked head, and not a failed head gasket or something else? What tests did they do?
Some options are to get a used head, and have it rebuilt. Or, get a new head from a discount dealer such as www.1stvwparts.com and have your local guy install it. You should also have a new timing belt, and water pump installed at this time as everything will be apart.
I've been losing coolant since I bought the car a year ago. Started out a pint about every 1000 miles. It's now about every 400 miles. Put a florescent dye in the coolant and checked the spark plug holes and found dye. Also found trace in the oil. Figured that it was a head gasket. Removed the head and the gasket was intact. Found dye inside two valve guides [not good]. Considered having the head magnifluxed and rebuilt but my local rebuilder wants $550. I found a new OE head through ATK for $695. I should get it next week.
I paid 5k for this car a year ago [e-bay]. 57000 miles, black GLS with a black leather interior with 17" Audi RS4 rims. Except for a few road chips on the front hood, it was in mint condition. I guess even with another $1500 I'm still ahead of the game.
Oh yea, water pump and timing belt are on the list as well.