Is the system bled properly? Sounds like there is bugger all coolant in it if the heater isn't working. Could be an air lock. The coolant may be evaporating if its getting really hot. But if its being consumed by the engine at a great rate, it would be misfiring.

A WRX blowing a head gasket, under normal driving conditions, isn't exactly common. But if Mao's working on it, trust his diagnosis.
And it wouldn't be cheaper to buy a new engine.

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F.B. Racing
01 WRX (STI badged)
2010 XR5 Focus
06 Impreza Hatch 2.0i