Head gaskets at an independent shop will be about $1100, from the dealer it'll be more along the lines of $3000.

The drive-shaft can be rebuilt for about $200, inclusive of parts and labor.

As for reliability, there's not much difference among D2s with the exception of the '03 model year. Stay away from 2003, they had a run of bad engine castings leading to oil pump failure with catastrophic results. 99 and most of '01 have CDL, which will be important if you intend to go offroading at all. '04 has the CDL also, but I gather that you don't want to go that new or spend that much on this truck.

I'd say you could probably get an early D2 (99-01) for around 4k. That should buy you a nice one with around 100k miles. And regardless of what you buy or spend you'll still need to go through Mike's checklist, so you may as well spend as little as possible and save the money for bringing the vehicle up-to-par on maintenance so you can drive it with good peace of mind.

Good luck, and welcome to the board!

 

Do a search for my thread "what to look for when buying a Discovery"