An update since I got the head gasket installed. First off, its a much better car and it was worth the time, labor and money. I've been commuting this week for work in some heavy traffic in Hollywood and Beverly Hills and it did all hold up nicely. The temperature gauge stayed at 80*C when driving and would steadily go up to around 90*C waiting in traffic or crawling at five mph and go back to 80*C when traffic would move again. For the first 30 miles I used a thinner oil and I could hear the lifters ticking, put Castrol GTX 15W 40 in it and the ticking stopped.
It looks like the head gasket job also solved the high idle the 300SE was suffering from. The very first time I started it up it after I got everything back together the RPM went back to 1800 RPM just as it had done before the head gasket replacement. When I started the engine the next morning to take it for its first ride, the RPM went up to 1800 RPM, stayed there for 10 seconds, then I heard a loud click from the engine bay and the RPM dropped down to 800 RPM. Ater that the RPM never spiked again, and stayed always under 1000 RPM when idling. The first couple of days the idle speed would be 800RPM but now it event out to 600 RPM in D, when in P it goes up to 800 RPM. Occasionally the RPM will fluctuate a little bit, maybe new injectors are in order. The normal idle makes definitely for a more relaxed and pleasant commute.
The next three items on the list: new upper control arms and installing a 19mm rear sway bar and the glass sunroof from a W140 that's been waiting to be installed for months.
