First, talk to an engine "expert" (like a university engine shop professor at a community college) who knows engines. Pay them a few hundred to document the potential damage and potentially visit the Toyota dealership to oversee or check in on their progress. I think I would argue for them to replace with new, complete motor and complete head. Make them document EVERYTHING that has been replaced. Their objective is to get you and your 4runner off their back for the lowest price.
Compare your expert's advice with what the dealership is telling you, and argue with the dealership to give you 100% coverage on what they didn't replace/repair that your expert advisor says you should have replaced/repaired (like a complete head). And for God's sake, communicate with them in writing so you can document what the hell is going on!
If you sue them, its the best thing for your case. Write every letter as if it will be read by a judge who will decide your case- its good strategy.
Letters that say " I on XX/XX/2006, visited Mr. B, your service manager, and he said. . . then I said. . . . I beleive a reasonable resolution to this is. . . " Maybe go on to say something like "My understanding from Mr. X is that the cause of the damage is that the oil plug was left loose during an oil change that occured at your dealership on x/x/2006 (for which I've retained the receipt). . . no other reason has been communciated to me by you or your mechanics . . . " I've retained Mr. Y, a college professor an XXX University, who has been in the auto repair industry for 20 + years, and has many credentials to establish that he's an expert at forensic engine analysis, and in his opinion, your replacement of X parts is / or is not sufficient to repair the damage your dealership has done. He recommends. . ."
You should consider having your own mechanic view the damage to document what he sees so it can't be minimized or hidden by the dealership. Anyway, give facts in your letters, so if you sue in small claims, when the judge sees it, he's fully informed of dates, names, what you've been told, what you've requested, dealer's response, etc.
If the dealer doesn't cooperate, sue in small claims - forget the attorney. Run the dealer's business name in your State's Secretary of State's website. It will tell you who the registered agent is and the registered agent is who you should send the "I'm gonna sue you" letter to, just prior to filing the compaint. Also, he's the guy you personally serve once you've filed the small claims action.
Usually small claims covers claims less than $10k or so, depending upon state. This is a perfect example. Some states, like Colorado, allow one party or the other to move the actions out of small claims and into District Court. If that happens, then hire the attorney and ask for attorney's fees to be paid by the dealer.
If you don't want to get screwed, do your homework and become the expert or pay someone for their knowledge who has litigation experience. Make some calls.
Good luck.
