I looked at Kelly BB and your car w/215K miles wholesales for about $6000, repaired. Based on your figures, you will net about $2000-$3000 wether you fix it or not. If you like the car, $3-$4K is less than $10K+ for another used car. Since you are not new to Mercedes, you know a 8-10 year old car WILL require repairs of about $1K-$2K per year to keep it running.
You will have those same repair cost PLUS a car payment, to a friend no less. If your payment is $300-$350 a month, you'll be spending $5K-$7K per year to drive. By the time you pay off the note to your friend, you will more than likely be facing the same situation.
Valve guides are not that expensive and a tranny would be the next biggie that might rear it's head. That's a total of about $3K, pretty cheap driving. no one knowsmore than me what happens when the car bug bites.
My two cents is, if you really LOVE the car, fix it and keep it, because only a Benz freak will understand paying more than a grand for a car with over 200K on it. If you'r ready to go into debt, with a friend as your lender, go for it.
91 300E 120K
90 300SE 275K (sold)
92 BMW 525iM 120K
90 BMW 525iA 175K
85 300D 175K (sold)
84 300SD 245K (sold)