Look at my signature - I've owned several of each. Yes the later ones will cost more to buy, but parts are no more expensive, and they are actually easier to work on (IMO). And they're worth every penny! Drive a few good ones and you'll see what I mean. Huge difference. I will never buy another 123 - can't wait to unload the one I have now. Now to answer your questions:
1- The 1986/87 models are known for having weak cylinder heads. They don't tolerate overheating. Replace the head with the new, updated style and the engine will be almost bulletproof.
2- The 1990-95 350SDL, 300SD, S350, etc all have problems with weak connecting rods. This is a bigger deal (and more expensive) than the head issue. Avoid these unless you simply must have a late-model S-class diesel.
3- The 1990-95 E-class models have no problems with the head or block. These have less power though. The 5-cyl turbo from 90-93 was about 120hp, and the 1995 6-cyl 24v DOHC non-turbo is 134hp, compared to the 1986/87's 148hp.
My recommendation? For the best in power, get a 86/87 and watch the temp gauge - fix the cooling system if you ever see the needle above 105C. For better MPG (mid 30's), get a 1990-95 model. More details on buying a 1987 300D/TD are at this URL:
http://buying.articles.mbz.org/checklists/124/
(it says all 124 chassis but that's a typo).
Regards,