I would (at least) go with flushing the lines out, adding a 2 way liquid drier and a suction drier. pull a micron vacume to 400, lock the system in the A/C mode and run it a week, then replace the liquid drier and remove the suction drier. Was the cut in the aluminum coil? A repair kit for that will be permanent. I don't know what you mean by damage to the "condensor"- that is the outdoor coil section. It is possible the system ran while it was raining (heat mode) and if a lot of moisture is suspected, checking the oil in the compressor would help make the desicion on which course to take. Many american standards have a 10 year warranty on the compressor and coil, so doing the above first would be my choice. If the unit needs replacing because of moisture contamination and it's that bad, the best route may be to replace the whole system for the long haul. Green oil and clumpy oil in the compressor or lines will indicate this extreme moisture contamination and installing filters driers won't work.

That is a thought, but I won�t be able to sleep knowing the AC could go at any time. I have been doing some reading and am considering replacing it myself. I can buy a complete Rheem online for about $2700. If I install 95% myself, and then have a contractor charge the system, I think I'll save over 1500 bucks. It really doesn't look that complicated for someone handy. I recently read an article promoting doing it yourself and said everyone in the HVAC business will tell you why you can't do it. However, those same people wouldn't think twice about putting brakes on their car themself and not using a certified mechanic. Interesting parallel, huh?

Skin is correct. Generally speaking propane price tracks oil prices. Propane while still expensive is historically cheap at the moment mainly because of the glut of oil and their falling prices. Understand that oil topped around $150/barrell several yrs ago and now hit a new recent low around $35/barrel. If you will post current electric cost/KWH and current propane cost/gal, I will be glad to run a down and dirty fuel cost comparison. IMO

"The two contractors below came up with a 2.5 size but heat pumps only come in whole sizes. Am I over sizing the unit if I go with the 3 ton heat pump?" The heat pumps you were quoted are 2-stage models. All 2-stage heat pumps come in whole ton sizes. You would have to get a single stage heat pump in order to get the 2.5 ton size. I am in central NJ so my climate is very similar to yours. Did you review the load calculations? Is the 1800 sq. feet all on the second floor below attic space? Given attic poor insulation (R19 or less?), the 2.5 ton may be slightly under sized. In my opinion I don't think a 2-stage 3 ton heat pump is over sized. We would have to look at the data sheet, but most likely the lower stage will be less than 2.5 tons. It is difficult to comment on the price because of the required duct work. It sounds there is a lot of labor involved in the new duct work and attic installation. Contractors don't like to break out line item cost. Getting one price is very common. You have gotten 8 bids, so you compare prices. You did the right thing by rejecting people who don't even go into the attic. The answer you other questions, I think 2-stage equipment is worth the extra money. It is going to do a better job of lowering the humidity in the summer. It should also be quieter when running on the low stage while you are sleeping. I think suspending the air handler from the rafters is the best way to minimize noise. I don't have experience with attic installed equipment, but it seems logical you would cut down the vibration from the ceiling. You want R8 insulated ducts in the attic. The main duct should be metal and all joints should have mastic. The flexible ducts should have no kinks. If it looks bad to your eye then it is probably bad. You are doing the right thing by investing in improved duct work. I like Carrier over Lennox. You also want a 2-stage thermostat. Find out the model number and make sure it is in the quote.