"the chain had some teeth missing, but I don't know how in the hell the valves could be bad from that small amount of damage"
These are close tolerance, interferance engines. If the chain is off by just one tooth, the pistons and valves will contact one another. So in reality, that "small amount" of damage is not so small.
'73 280SEL 4.5 (9/72)- RIP
Only 8,173 units built from 5/71 thru 11/72
'02 CLK320 Cabriolet - wifey's mid-life crisis
2012 VW Jetta Sportwagon TDI...at least its a diesel
Non illegitemae carborundum.