Hmmm -- sounds just like my 220D!

check the timing chain, its probably stretched.

Check for lots of oil in the air filter housing -- if it is sitting in the ring where the filter goes, it's leaking out of the separator.

The odometer can be fixed by applying a drop of Loctite to the potmetal gear/shaft interface. YOu must remove the speedo to do this (fairly easy) and I'm not sure if the W123 is as easy as the W115/W116/W108 -- I think the gear is on the other end of the drive shaft from the worm gear on the W123.

Peter

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1972 220D ?? miles
1988 300E 200,012
1987 300D Turbo killed 9/25/07, 275,000 miles
1985 Volvo 740 GLE Turobodiesel 218,000
1972 280 SE 4.5 165, 000 - It runs!