Does the vehicle run well? If the oil was not changed for 35k there could well be some excessive wear. Spending $10K on a repair seems out of line to me. I'd try using a heavier weight oil and drive it. Before spending $8-10K I'd try changing the oil every 3,000-5000 miles with a 20w50 grade and see if the oil consumption gets under control.
I've seen a few oil tests done that show that oil, even dyno oil, will continue to lubricate pretty well after the suggested interval for replacement. I'm not sure that there is that much damage. To find out though, you need to have the engine broken down and inspected. This is pretty labor intensive so that is where the major costs are. You also might look for a replacement engine from a wreck. That 3.3 engine was used an a lot of Toyota vehicles as well as several Lexus models. You might even be able to find out the maintenance history of a wreck.
Another alternative... you might consider trading it in at a Lexus dealership on a new Lexus. Your vehicle along with $10-$15K should get you into a new purchase. Or even consider a lease.
Finally you might want to have your vehicle inspected to see if there was any tampering done. If it could be proven that the dealer who sold you this vehicle, knowingly sold it to you while being aware of this problem and didn't disclose it, you might have grounds for legal action. Could be hard to prove.
If you bought this vehicle from a Lexus dealership, you can be sure that they had access to it's maintenance records or lack thereof. You might contact the local TV networks ombudsman and see if they are interested in investigating this transaction.
Last edited by jfelbab; 11-12-08 at 08:06 AM.