You have to understand that in todays world a masonry chimney while an excellent architectural device (because we are used to seeing them) they are a terrible mechanical device. Get rid of your masonry chimney. A wood fireplace will actually work better with the factory built chimney than the masonry. On a gas fireplace you will have the choice of a direct vent (out the back) or you could run a B-vent stack up above the roof line. That would have to be enclosed.
You will have a significant amount of repair work on the removal, but you won't have to worry about it falling on someones head when the ground shakes. With the air quality limits I think you are going to end up with a gas unit.

Your chimney is too much older thatâÂÂs why i think you have to replace itâÂÂs may create a huge problem for you after few years. I know itâÂÂs very costly to replace it but you have to do it for your family safety . Now many kinds of new chimney has been came into the market they are very cheep and handy also you go for it.

Thanks all! We ended up hiring a structural engineer who will be assessing the chimney, foundation, and overall house structure to help us decide the best course of action. Because the chimney is structural to the house, removing it completely is not trivial (and hugely expensive) so we are leaning towards the middle ground options of removing portions of it to lift weight, but we'll see what the final recommendations from the engineer are.

Hiring a structural engineer... The right move! Please keep us posted on findings and actions

Thanks! Happily, the engineer's report was that despite the scary looking crack in the side of the chimney, the movement in both the house and chimney was well within the range of normal for the age of the house (house has settled about an inch) so he recommended no action except to seal the crack and improve drainage at the foot of the chimney and around the foundation perimeter. We are on heavy clay soil in an area that is in severe drought, so apparently this is causing more pronounced/noticeable settling of homes. If at some point we decide to do the foundation on that wall (evaluated as not great but serviceable), the recommendation was to underpin the chimney foundation at the same time to strengthen it. Like all of the masons we've had out, the engineer agreed that the chimney above the roofline would come down in an earthquake without question, but given that it is not leaning and would likely fall on our driveway, he did not recommend any immediate action there either, as he disagreed with the masons that taking the top portion off would stop settling below--thought the only reliable way to stop this was to strengthen the chimney foundation itself. (We are still contemplating taking it down to the roofline just for our own peace of mind on seismic safety, but haven't decided on next steps there yet.)

So a surprising end to a somewhat stressful few months, but happily with a much lower price tag (and the added benefit, hopefully, of a dry basement if it ever starts raining here again!) Thanks for all of the feedback!