Below is a message I posted in December last year, with a similar problem.
I'm pleased to say that after a few thousand km's of running in the engine is back to its usual ways, and I haven't exerienced any other problems!
(And I never did find out what the repairs would have cost...)
I purchased a second hand 156 selespeed with 9000km on it about 4 months ago. Firstly I'll just say I love it! The car handles superbly, I'm still finding excuses to take it for a spin! The selespeed is great, I've had to adapt my driving style slightly to get the most out of it, but I'm reaping the rewards now!
Anyway, onto a few little probs I've had, just wondering if anyone else has experienced a similar thing.
While approaching a round about changing from 3rd down to 2nd a slight "crunch" was heard as gear engaged, looked down and all appeared normal, revs were around 5000 (I was in a driving mood ;-).
About 2 seconds later a very loud grinding mechanical noise was heard, and the car stopped dead in the middle of the road (luckily no one was behind me at the time). Attepted a few re-starts with no joy. Rung the alfa-care people who dispatched a tow truck.
To cut a long story short they found that a pulley had shattered, and jammed the cam timing belt, pushing the valves into the cylinders far enough that they were hitting the top of the pistons. 10 of the 16 valves were replaced, along with the valve guides. There were visible dents in the top of the pistons, however these were not replaced. In all the car took 11 days to be repaired, but I was given a free loan car in the meantime.
My question now! Since I've had the car back it definately hasn't felt as powerful or happy to rev (it was always so willing to go to the red line). Is there going to be another run in period now? (the engine had 12000km on it when this happened).