I agree with some of the above advice:
1. A leakdown and compression test will tell you what you need to know concerning the engine. If it is fine, don't worry. I've seen all sorts of MB engines (4,6, and 8's) at very high mileages, and bottom ends tend to last longer than most owners (the avg MB buyer in Canada is 60).
2. The thing to worry about are the things that can $1000 you to death. ACC and AC. Suspension components and electrical items. Check that the timing chain and RAILS have been done. Problematic on the M116 4.2L engine.
I can't comment on the price (I live too far away) but would caution about using KBB or other measures. If possible, take the car to a wholesaler and shop it out. The closer you get to that price the safer you'll be. Suppose that "Cash for cars" will give you $4000 for the car on the spot. Paying $5000 means you're $1000 "illiquid" on the car. And don't forget that premium cars carry premium prices.
We just sold our 1998 E300D turbo. Most 98 E-Class cars sell in the $40-42K range. Despite all the troubles we've had with the E300, we still got TOP dollar for it. ($47K) Tons of warranty left (nearly three years) and a superb service history. Also, despite being nearly five years old, the car could have been parked in a showroom and sold as new. Premium cars sell at premium prices.
1998 C230 "Black Betty"