Head gaskets leaking, heads are warped, etched. Will need to be re-milled.
Valves are so bad that they will most likely have to be replaced or at least re-bored.
This car was in to a Subaru garage for every service until the last 2 oil changes. The mechanics at the Subaru garage never mentioned any of this to me. I had a full service done at 63, 000 miles; all the standard stuff and the timing belt replaced.
I asked then about the loud clicking noise that the engine was making, and I was told that this was typical and not to worry about it.
I shifted to a local garage/mechanic because of travel cost and service costs with the high gas prices, and that was when all these problems were discovered.
Research on line was clear that getting this fixed at a Subaru shop would be considerably more expensive than getting it done locally.
Subaru apparently has had a defective design for many years, and they at one time extended the warranty to 100,000 to cover all the failures.. But the 2001 on up are limited to 60,000, so owners falling into this mileage and year mine field need to consider the possibilities.
Depending on which on line survey or discussion site you visit, 18 - 21% of the Subaru owners reporting, talk about head gasket failure between 65,00 and 110,000.. So this expensive repair on a 6-7 year old car but with relatively low mileage is a real bite. And I think it says a lot about the lack of quality control in this particular model of Subaru..
I definitely will never purchase another one. It's a shame because it has been dependable to a fault up until now. But for the engine to have a major failure just a couple ticks past the warranty limit is a red flag. Since this has been an ongoing problem for at least a decade, I am assuming they are in no hurry to fix it. They have a very aggressive sales campaign to existing owners. I can see why now. I thought I had purchased a car that was an equivalent to a Honda or a Toyota for longevity. Boy was I wrong! I wish now I had traded in when I could. Who would have thought that such a vehicle would be ready for the scrap heap at 79,000.