The dealership has most likely ordered a new head. If it were me, I would insist on looking at the pistons when they pull the old head off.
I can't imagine that they will be pretty looking. If they are dinged up they need replaced too. I would not want the same mechanic that possibly screwed something up on the timing belt change to attempt replacing the pistons.
I've driven VW diesels since 1987. I change my own timing belts. It is never wise to put a new timing belt on without a new idler. (If that happened) I can't imagine a dealer not putting a new idler on.
I know everybody has bad days, but it might be time to look for another mechanic.
I doubt I'd keep the car unless VW puts a new engine in it. Good luck in dealing with this issue!
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