I'd not waste a lot of $$ on the head if the rods are the next thing to go?!
Out of curiosity, ask the mechanic if he knows what a set of upgraded rods would run you.

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'95 E320 Wagon my favorite road car. '99 E300D wolf in sheeps body, '87 300D Sportline suspension, '79 300TD w/ 617.952 engine at 367,750 and counting!