Don't know for sure what caused the head gasket failure. Car has 100K miles on it, but it did sit with very few miles put on it for a significant amount of time (5+ years). I drove the car back from Baltimore to Dallas with no issues, but only a few times since getting it home. While I don't abuse my cars, I do drive them fully (all the way to rev limit) and had taken her for a cruise the weekend before the gasket failed and ran her pretty hard. Gasket failed the next weekend about a minute after starting her up (white smoke, low coolant warning, knock sound).
As for questions of what it takes to do a 391 (and cost), best to contact Pete. He has a post
here about 391 build. I will say that the cost of a 391 from Pete is way less than any other quoted numbers I've seen.
Expected power for 391 is 575-600HP (including full porting), plus another 25HP for cams. I may go a little more aggressive with cams, so we'll see how it ends up. Would be awesome if we could hit 540RWHP, which is about what stock C6 ZR1s do, but we'll just have to see what she actually does.