My first question is going to be, what does your mechanic friend recommend?
My second question is going to be - why are you asking us, we weren't there when the tests were done and you haven't shared the test results with us - are you asking us to break out our crystal balls, or will you be satisfied with a SWAG (stupid, wild assed guess) ?
My point is this - you have given us very little detail to work with, all we know is the cooling system leaks, and the car blows white smoke out the exhaust after it warms up - you haven't shared the compression test results with us, you have told us that the cooling system leaks, but not where the leak is, and now you expect us to guide you...
Did you do wet & dry compression tests? What were the numbers? What did the plugs look like when you removed them? Does your mechanic friend know how to interpret the results of these tests, or is his experience limited to performing the tests? Whilst I'm about it, did he perform the tests properly?
Oh - if the cooling system is leaking into the combustion chamber, white smoke is one of the possible symptoms.
What's next - I dunno - maybe a head gasket replacement, maybe a valve job, maybe a re-ring job, maybe a rebore & complete rebuild, maybe swap in a 1.6 from a Tracker or Sidekick - it all depends on those compression test results and perhaps what you want to do with the vehicle.