Thanks for the replies...this is a real basic oil change kind of shop - I don't think there is any way they could put in a motor...and since he is not willing to assume 100% liability he is only willing to pay for the engine.
Here is a link that I found -
/http://www.carmonkeys.com/1984-MERCEDES-BENZ-MERCEDES-300D-Engine-Assembly-123-Type-300D-300CD-5-Years-Warranty