Noone has mentioned anything about timing. I have a similar problem with a 240D engine I'm running temporarily. I plan on checking the timing this weekend. I'll let you know the outcome.
Say hello to my son if you see him around Austin, he's a Junior at UT.
'84 Euro 240D, 516K miles
'88 300E 5 Speed
'81 300D Daughter's Car
Over 800,000 miles in