If your temp gauge was spiked and the heater was blowing cold air, I'm sorry to say your mechanic is wrong. You lost your waterpump. This is a very common occurance on Duratecs in model years '98 and prior (it happened to me, too). Typically if you pull over right away and shut it down you can avoid immediate damage, but unfortunately since you saw the oil light flicker its quite possible the engine is ruined.
http://www.contour.org/FAQ/FAQ.php?s=probs&displayid=9Of note in the link:
Quote:
Their diagnosis was a thermostat. Over my strenuous objections, I agreed to let them install a third thermostat ONLY if I didn't have to pay for the labor if it didn't fix the problem. It didn't, but cost me another day in the hospital.
