It seems like I am not the first who thought about the volvo overdrive to a W123.
My plan is to use it after a 722.118 4-speed auto gearbox, 240D engine.
My ideas and some arrangements:
1. Bought a Volvo trans with an overdrive (waiting for delivery)
2. I will cut the tunnel from a wreck to have a test bench.
3. Found a company that will sell me the end cap of the OD - red part - (it will be a separated and sealed unit, not sharing oil with the trans) also a shaft - blue part - with the 3 screw yoke connection to the MB trans through a flexdisc, another yoke on the OD output to connect the shortened propshaft.
4. According to my measurements, the OD will fit in the tunnel, I think the biggest problem is the transmission linkage.(dimension B????)

Here are some pictures and dimensions: