Check engine light flashing, truck idle very rough and stalls, misfiring

i have a 2007 Yukon Denali. Check engine light came on and started flashing right after. Runs ok when traveling but at a stop it idles very rough and misfires, and is difficult to start. Mechanic said it's an internal problem and may need a new engine. Anyone have this kind of a problem before? What was it? What happened? I have the extended warranty thank god but I don't want to go through the hassle of getting a new engine.
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