Have you ever built a car from the ground up? That's what you're talking about here. If you've ever done it, and you still want to do it again, then this will probably be more satisfying to you than purchasing a 500E. There are a few project oriented people who thrive on such projects.
However, if you've never done it, I wouldn't recommend it. It will take over your life. It's more work and time involved than you could ever imagine. Make no mistake about it, what you're talking about doing is very close to building a car from the ground up.
If you are one of those people who takes on such massive projects AND finishes them, my hat's off to you. You are one of the very few. I did it once AND finished it. I may do it again in my lifetime, but it won't be while I'm raising a family and earning a living. Approach this with an EXTREME amount of thought.
Best of Luck,
'84 Euro 240D, 516K miles
'88 300E 5 Speed
Over 800,000 miles in