I have heard of a valve guide/seal problem on the 103 engine, but not the head cracking problem you discuss. I asked my tech about the engines when I was looking to buy another 300E, and he said he liked the 103 engine better than the 104, that he had seen more head gasket problems on 104s than 103s. If you are really worried, you could find one of the rare diesel wagons or sedans and maybe bypass the issue altogether. I understand they have alloy heads as well, but I haven't seen many posts on their gasket failures, even though I would have thought they would be greater due to the compression/temperature of a diesel.
I would be more worried about the AC systems than the head gaskets/seals/guides. I was more inclined to buy a later w124 because they had already been converted to the new 134, as we can no longer legally install r12 in Orange county, I am told.
Blackmercedes posted this link - it is a good overview of the w124 models.
[Edited by JCE on 06-28-2001 at 03:22 PM]
2003 Firemist Red/grey leather SL 500
2015 Palladium Silver/black mbtex GLK 350
1987 Smoke Silver/burgundy mbtex 300E Sportline (SOLD)
Click to see 87 300E