Depends on what you want to spend. I know http://www.adsitco.com/
has rebuilt engines for a good price. If the engine can be repaired cheaper, I would do that. If you want to add a bigger engine, the m103 3.0 fits nice and easily as long as you get one that coressponds with the model year of your car. You currently have the m103 2.6 so the its based off the same design. Just get one before 1990 because the feul injection management was upgrade after that.
If you have the 3.0, I found out that I didn't even need a trans upgrade. So those are your options.
Adsit charges $3950 w/ and $800 core exchange.
Chirag (Charlie) Patel
99 Mercedes-Benx ML 430 V8 w/custom TV, Video, UHF, speaker system
93 190E 2.6 (4-sale) w/ an amp, equalizer, and CD-changer, integrated w. stock stereo for integrated cellular phone speaker system
2001 C-Class - Maybe (if 190E sells