Vw beetle emissions light?

I have a w reg vw beetle that has done 145000 miles, the exhaust emissions light came on and shortly after the car was cutting out. I took the car to a garage and they told me firstly there was a hole in the exhaust, they then said there was a hole in the sump! The hole was fixed but now they are telling me i will need a new engine as the engine has been starved of oil. I have picked the car up and it starts and drove it down the road it didnt cut out or make any noise. im just wondering how it is still working when apparently it needs a new engine. Would be gratefull for any advice as for all i know the garage could be conning me....

Chelsea
April 2011