Sounds to me like you need a new tech. A water pump shouldn't cost more than half what you paid.
It could be a loose belt. However, if it is the air pump, they can be had for around $300-$400 for a rebuilt one. I think it's about two hours labor to put one on, or it's not too hard to do yourself.
I just had mine replaced on a 300SE, it cost me $350 installed.
91 300E 120K
90 300SE 275K (sold)
92 BMW 525iM 120K
90 BMW 525iA 175K
85 300D 175K (sold)
84 300SD 245K (sold)