I'm sure there are more options than these two! Why not check around for a cheaper reconditioned engine? I know a 123 nutter who found that after his 300d's tranny had given up the ghost (at a little over 600k kms!), it was cheaper to install a reconditioned petrol motor and tranny for a 280e than to buy a new diesel job!!
There are often engines in good nick available if you wait and know where to look. If your in/near Australia I can get you a beautiful 1983 300d engine with only 140k kms on the clock. Another 123 nutter's car was hit severely (much worse than mine) by hail and is looking to sell its parts.
Keep the 123. They are bullet-proof, elegant and reliable! Furthermore, stats suggest that well maintained 123s are fast becoming rare classics, the so called last of the "chrome Mercs". Check out http://www.geocities.com/MotorCity/Downs/9347/w123ccc.htm
for more information on this one.
1984 300D 235000 kms