oil leak

What is your question?

I just bought a 1998 Neon from a local used car lot for my 16 year old daughter, advertised in "Perfect" condition. Paid $1950.00 for it with 195,000 Kilometers (it's from Canada) or roughly 121,000 miles. Had two backyard mechanic friends look it over before I bought it. They crawled underneath it at the car lot and found no visible signs of leakage, wetness, etc. They said it was very clean and dry underneath. Broght it home, the next day there was a pool of oil in my garage (about 10 inches in diameter). The car lot obviously did a good job in cleaning it before I called my friends to look at it so as to hide the leak. (By the way, they won't do anything for me, stating the car was sold "as is".) Took the car to a mechanic who jacked it up to take a look. The mechanic said the whole back of the block was wet with oil. He thinks it may be the head gasket, but saw that it has a newer style head gasket on it so that kind of baffled him. He then said it could be the rear main seal, but he can't know for sure until he pulls the transmission He said either way the tranny has to come out to repair it, which is about a $700.00 job. Because he's a friend of a friend (and I'm a low income, single mom) he said he'd do it for me for $350.00. I'm now doing some research and I'm seeing that it could possibly be the cam sensor o ring?? Is this possible and would that cause the entire back of the block to be wet with oil? Does the tranny have to come out to replace the o ring if that is in fact the problem? (He also said that the alternator and serpentine belts were the originals and pretty frayed, needing to be replaced, along with the pcv valve and hoses which are currently rigged with silicone, but that these are minimal expenses.) I feel I got scammed by the car lot, and I don't want it to happen again with the repairs. Any advice you can give would be greatly appreciated. In addition, upon doing research I noticed that the timing belt and water pump are probably due for replacement at this mileage. Although I really can't afford all of this, if they have to remove the tranny to fix the oil leak, would it be a good idea to have the water pump and timing belt replaced at the same time, or are those in a totally different area? And do any of these issues make it unsafe for my daughter to drive in the meantime? Thank you in advance for your input.