Hey John, I know alot of guys don't like to hear it but, I have rebuilt/replaced more than a few Kubota engines at the 2000-3000 hour mark. Before you tear in to yours take a look at a few things, to prevent your new engine from suffering the same fate; Pull the rubber intake hose where it attaches to the intake manifold, take a look inside the hose, run your finger around the inside, do you notice dust or dirt build-up? Do the same with the inside of the manifold. If you see build up/does'nt take much. You have verified the cause of the failure and your cylinder walls are most likely "dusted". Inspect the intake hose connections and the hose itself, check for proper air filter element (there is two different ones).
Another way to verify dirt contamination is to take a look at the intake valve faces (go ahead and pull the head, you have nothing to lose at this point) If there is a noticeable groove in the faces this also indicates dirt contamination. With the head off, you can inspect each cylinder and see what condition they are in. If they are darkish grey with no or little cross hatch and a noticeable ridge at the top, this also indicates dirt ingestion. If you see staining, uneven wear patterns such as some cross hatch on the side of the cyl walls adjacent to the piston pins, this indicates overheating and or excessive engine lugging. Alot of carbon build up with some cross hatch still showing and it may have been overfueling. If you remove the pistons and find cracked rings and ringlands, that is a sure sign of ether use. Now depending on the condition of the cyl's and pistons a re-ring just may be the way to go, I have had good luck with honing a good cross hatch back into the cyl's Maybe removing .0001 or .0002 out and installing new std. rings. Kubota engines tend to have quite a bit of meat in them before hitting overbore size. Replace the connecting rod bearings, do a valve job, test injectors, clean flush and pressure test radiator (do this one no matter what) re-assemble and it 's good to go.....This can usually be done with the engine still in the machine which is a big plus labor wise.
However the price you got for a new engine sounds real fair, if it comes with new injection pump, injectors, starter, water pump etc. If you are going to tackle the engine replacement. Have a good place to dissasemble it, I would highly recommend a good half inch air gun with a good compresser, 17mm. 3/4or19mm, 7/8, and 15/16 swivel impact sockets for getting all the blasted subframe and loader frame peices off. Check the hyd pump drive out good for partial sheering, take a good look at the clutch and flywheel, be patient and if it helps, take pictures along the way, 'cause you're gonna have a heck of a pile of parts halfway through. When re-assembling the frame pieces, keep EVERYTHING loose till all the bolts are back in, then apply down pressure on the loader on a level surface, lifting the front wheels off the ground while tightening everything back up as far as the frame pieces go. Good luck however you go, and as always, we are here to help you through it........................