I just did the next oil drain. It has gone about 850 miles since I drained it Monday night, and saw the metal particles.
The magnet has probably 5% or less as much metal showing compared to what it looked like Monday night. This was relieving.
I've had a magnetic drain plug in most of my cars for the last 30 years, and some always show just a trace of black at oil change time. It just seems to be normal with most engines. Until my mishap with this engine, I saw NO black on the magnet at oil change time. Hopefully it will return to that.
I really expect that between the water in the oil and the rust on the cylinder walls, and just the fact that it was apart allowing dust into the innards, even though I kept everything covered with rags, this was just the result of all that.
Other good news was that it went the 850 miles and the oil was still at the exact same level on the dipstick.
Everything is working out well. Also I gained some respect for the M103 engine. Yes they have the valve seal reputation, but this is still another Benz engine that rebuilds well. Some engines lend themselves well to such repairs, and others are made like a dollar watch. I love the way this one comes apart and goes back together. Definitely a rebuildable engine.
Thanks for everyones comments and encouragement,
'01 C Class, Six Speed
'84 Euro 240D, manual, 533K miles
'88 300E 5 Speed
'81 300D Daughter's Car
Over 800,000 miles in