The mechanic took off the valve cover of the 1988 300e which was not passing emmissions and making a rattle in the top end around 4500 rpms. I saw for myself worn out cam lobes and dirty crud all over the valve springs/rockers etc.
He and the service advisor told me that they were afraid to think about what the bottom part of the motor looked like if the top half looked this bad. They recommended one of two routes. A new 300e motor (rebuilt by Mercedes) for around $5k plus labor. Or a used low mileage motor from some place in Texas for around $2500 plus labor. It comes with a 2 year warranty. I opted for the used motor. I think when its all said and done I am gonna be in for about $5000 worth of repairs. Thanks to everyone for their suggestions. I know many on this board say the bottom ends of these motors are strong but I don't think I want to take the risk that a new top end won't make the bottom end fail. Although the mechanic said the motors are usually good for around 300K miles, I figure one of these used motors might get me around 200k.