The verdict: Blown head gasket plus pits in the head where the piston wall meets the block. Estimate for the entire job including the machining of the head ~$2500.  Good thing the car is paid for...not the most reliable car I've ever owned. The '94 wagon makes this car look sick as far as reliability goes...and my wife wants to get rid of the wagon...never!...although it will need blower regulator and blower motor soon and maybe the dreaded evaporator soon too...  Good thing i have the Tundra 
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dtf
1994 E320 Wagon (Died @ 308,669 miles)
1995 E300 Diesel (228,000)
1999 E300 Turbodiesel ( died @ 255,000)
2006 Toyota Tundra SR5 AC 4X4 (115,000 miles) rusted frame - sold to chop shop
2011 Audi A4 Avant (165,000 miles) Seized engine - donated to Salvation Army
BMW 330 xi 6 speed manual (175,034 miles)
2014 E350 4Matic Wagon 128,000 miles
2018 Dodge Ram 21,000 miles
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