The quote is about $800 too high in my opinion.
You won't need a timing chain as they are rarely, if ever, replaced on M103 and M104 engines.
If you call around, most mechanics do a head job (with valve guides and valve seals), send the head out to be surfaced, and replace the head gasket for between $1,200 and $1,400.
My mechanic did mine for $1,400, and my engine is the 3.2 liter M104 engine which is more expensive.
2001 E430, Bourdeaux Red, Oyster interior.
1973 280SE 4.5, 170,000 miles. 568 Signal Red, Black MB Tex. "The Red Baron".