Its just an inexperienced tech looking at your car. Probably in the manual it says if all these tests fail then replace the engine not do more necessary tests. Remember most these manuals are for warranty repairs. The MAF and O2 sensors were probably 75% necessary. If I were you I would take it to another dealer or look for a MB shop that knows V12. Complete engine failure sounds fishy. I really doubt it. My engine was running rich momentarily and I smelled Sulfur from my cats. If your engine was pushing that much fuel then it would be very noticeable. Sparks and smoke from exhaust. Did you ever check oil level between changes. I doubt that your oil washed away. What type of gas have you been using? Have you followed maintenance? I own an 96 SL600 and its been really solid. Look at your emmision smog tests forms. Has emmisions been increasing gradually. If another shop really recomends a new engine, then contact MBUSA and demand goodwill and you might be able to sue as a lemon. I know a shop located in Vanowen and Canoga called Monaco Motors. They work on my V12 and they service Ferraris, Porsches and Mercedes.