It's exceedingly hard to diagnose noises from long distance. So I can't say for sure what the culprit is. However, I would be inclined to believe your mechanic. If you decide to go the transmission rebuild route, here's some food for thought.
Scott (KLR3CYL) and I specialize in rebuilding Insight transmissions. I'm confident in saying nobody does it better than we do.
Every transmission gets completely disassembled, thoroughly cleaned and inspected. We replace all of the bearings. We do the 1st and 2nd gear syncro tab-ectomy. This permanently fixes the downshift grind issue. We restore the ball detents on the shift forks if they are excessively worn. There's more, but you get the idea.
We also do core exchanges where we send you a fully rebuilt transmission and then you send us your original transmission back.