Congratulations on finding the needle in the hay stack. I found mine a little over two years ago, I looked for a 5 Speed 300E for a very long time before finding this one. It had 88K miles then, now has 170K.
The car had extensive records and I saw where the valve seals were replaced, I thought that it was just a trumped up repair by the shop that had charged the previous owner for some questionable repairs. I since learned that there was a serious valve seal problem with these engines. I'm still skeptical about the repair because mine uses NO oil. I change it every 3,300 miles and it's still at the full mark when I drain it. Unless you are having low compression due to the need of a valve job, or high oil consumption with blue smoke at cold start up, I don't think the head needs to come off.
As far as increasing the compression, I personally believe that this would be a mistake. This is already a very high compression engine, given todays fuel availability(or lack thereof).
Being Frank, I'm kind of surprised that your impression of this engine is that it is a stump pulling torquer. My impression is that the low end torque is adequate, but it really doesn't "come on" until about 3,200 RPM.
In Germany, vehicles are taxed (heavily) based on engine size. For this reason, the German manufacturers engineer their engines to get as much performance as they can from the smallest displacement. When I say as much as they can, I mean within acceptable drivability limits. Unlike the old American V8's, porting, induction, cam timing, exhaust flow, etc. are already pretty well optimized. Because of this, whenever you cam up an American V8 and put a better manifold and exhaust, you have a lot of room for improvement. With most Benz gas cars, there's not a lot of room for improvement. Sure, you can improve some, but it costs BIG BUCKS.
Another thing to consider when camming up such an engine. One of the most important things about a performance engine is the combination. Everything has to work together. Ideally you should have induction, exhaust, cam timing, ignition timing, etc all laid out so that they work together, in the same RPM range. If you put 305 degree duration cam in an engine with ultra long intake runners and a plugged up exhaust, you're not matching these components. This is not to say that the M103 has either, but it is to say that the combination is not bad as it is.
The 300E is not a perfect car, but it's a great combination of ride, handling, comfort and a little performance. I doubt that the 5 Speed 300E will ever be as sought after as a Gull Wing, but as long as you can still buy gasoline, I believe it will be a well thought of car. To a stick shift lover who is also a Benz lover, you have a very rare find. If you go down the path toward serious modification, I believe you stand a good chance of turning your small treasure into a not so drivable, not so desirable car.
This is coming from someone who is not timid about modifying a car. I've built several hot rods, done several engine swaps and built some relatively radical stroker motors. But, my personal opinion is that the 5 Speed 300E is a good example of a car to maintain well and enjoy as is, with no radical modifications.
I added sportline suspension to mine, and it handles incredibly well when you consider that the car is so tall and narrow it looks like a phone booth.
BTW, now that you have posted that you have a 5 Speed 300E, you can expect to start getting emails asking if you want to sell it. I've received a number of them since frequenting mercedesshop.
Good luck and enjoy,
'84 Euro 240D, 516K miles
'88 300E 5 Speed
'81 300D Daughter's Car
Over 800,000 miles in