I faced your exact dilemma this spring. I bought my first MB, an 83 380 sel two years ago. It needed a lot, and I did a lot to it. But it still needed much more to be at the level I wanted.

I added up what it would cost to fix all the things it needed, estimated what I could sell my 380 for, added them together and started looking around to see what I could buy for that amount. Turns out it was a lot of car, especially in the w126 area.

In the end I sold the 380 for the same amount I bought it for, though it was a much better car than when I got it, and bought an 89 300 se.

The 300 needs a few things, but it doesn't need paint, the interior is near perfect, and all accessories work (cruise, AC, sunroof, seats, windows etc.). It has a new Alpine CD player, near new tires, beautiful wheels, no rust.

Best of all the difference between what I sold the 380 for and what I paid for the 300 was a lot less than what it would have cost to have the 380 painted, the sunroof fixed, the wheels refinished, the cruise fixed, the climate control straightened out, and more.

I learned the hard way that there's "nothing more expensive than a cheap Mercedes." Buy the best you can find, It'll cost you way less in the long run.

__________________
2000 Mercedes S500
1990 Mercedes 560SEL
1970 Triumph Spitfire