As for cost, in the UK a main dealer would charge about £1200 for a head gasket ( about US$1800), but a local specialist would be less.
The location of the rad/expansion cap depends, but it's where you'd normally add coolant/water. Some cars have an expansion tank near the RH (looking towards the front of the car) side of the engine area, near the suspension turret. Others have just a cap on top of the radiator. In England all 300E cars (I think) have an expansion tank. About a quart plastic container size.
But you need to get it checked out first. M-B dealers and local M-B specialists can fit an assembly on top of the radiator cap. The unit contains a liquid that changes colour/color (either us Brits or you Yanks can't spell
if exhaust gases are present in the coolant. I suspect this is the case with your car, but you need it checked out first. I mean maybe before you fit any more parts.
The "O" ring, I guess you mean on the stat housing? You may need a tiny smear of lube but plain old H2O should do the trick.