Do you hear a chain rattling sound when the engine is running? If so, the dealer assessment is probably correct. They must have heard the rattling and checked the filter.

^^And if he has over 120-130k miles or so then its only a matter of time

I'm at 116,000 miles...

With the metal bits in the engine, are you saying it's time to replace the engine (like the dealer suggested) or repair the chain guides/tensioner?

DF

I would check compression of the motor first. If numbers are good, you may get away with new chain guide.

yeah if there is rattling then the chain guides and chain should be changed. It does not eve have to be a rattle it could be a whirring sound like a alternator bearing that fails yet its guide deterioration.

Need to see what they found. There is a chance you will be able to determine where it came from. Also to see how much metal is in the filter. You can drain the oil and/or pull the lower oil pan to see what that reveals. Filings could be result of chain slapping but need to know for sure.

The extent of the damage depends on kind of metal, how much and how long it has been circulating. A leak down test will tell you what you need to know.