Yep- correct you guys... it was the ring off the gasket. When he showed me the gasket initially, it looked like it had no metal rings - not knowing what it was supposed to look like I thought ok on that.. But the whole explanation on the thread/smooth surface didn't make sense to me. I pulled out an old W-Body parts book and looked up the part # then looked that up online where I saw what the gasket really looks like. Thats where I was like damn, thats the ring from the gasket and maybe the other ring fell off or was stuck to the underside of that coolant pipe. The other ring was still on the old gasket just the gasket was so smushed it wasn't easily visible.
I went in this morning with printed pics of the gasket (and part number hah) and asked does this make sense (gasket ring corroded onto the timing cover) ? He was like nono... but if you want, we can take a look. Went out and exactly what GTP091 said, flat screwdriver pushed it right off. They put a new gasket on, topped off the coolant, burped out the air and that was that.. Manager made it all free (not that they were out a whole lot) as it was a misdiagnosis. What was so funny was when I headed inside with the mechanic, he was like hey I have some of those gaskets right here.
I honestly can't tell if it was just a dumb mistake, or if they were trying to "keep the lights on". The day I came in they were happy to take it in because they weren't very busy heh heh... Had I not taken that picture, and had I not bothered looking up what the gasket looked like, I woulda had no clue, and woulda been charged $1200! I can't imagine what the average person gets taken for!