If I remember correctly, the M104 is a 3.2 inline six, basically same block as M103 (if I am correctly recalling. Should fit in a W124 w/o too much shoehorning. Tranny should be OK as well. I haven't looked at this stuff in a while, so don't take this opinion to the bank.

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Jeff L
1987 300e
1989 300e
1987 BMW 325