Visual may not be enough. I don't know how x-raying can help - that's more for casting porosity, not cracks. I'm sorry to hear you spent all that money only to be back at square one.
The high coolant temps indicate exhaust leaking into the coolant. White smoke indicates coolant leaking into the combustion chambers. Oil in the coolant may be related or it may be a different leak. You didn't mention whether the head deck surfaces were checked for flatness or corrosion. This would be the first step when it's apart. Some people go ahead and skim (or shave) the mating surface anyhow. If that checks out okay, then you'll have to start looking for cracks. I imagine the diesel heads are made of iron. This would make them good candidates for Magnafluxing. A good shop should have this machine which checks ferrous parts for cracks.
If the head is aluminum, critical areas can be checked by liquid dye penetrant methods. One leak path not visible in aluminum heads is between the valve seat counterbore and inner water jacket. Only pressure testing can uncover this leak path.
Another possibility for leaking can come from a cracked bore in the upper part of the cylinder block.
So basically, when you have the head off you need to clean both mating surfaces, check for flatness, and keep inspecting the related parts until you find the leak path. And don't give up until you find the problem. Once fixed - and you can probably do a better job than the mechanic - you'll feel good about the car again.
95 E320 Cabriolet, 131K