I read a post on the W126 forum at www.mbworld.org and it says that there have been the following conversions, two W123 240Ds had a 380SEL Euro engine and a 560SEL Euro engine in them. V-8 gassers can be put in W123s.
-Joe
P.S. There was even a 500SEC with a 3.0L motor transplanted in it from a W126 300SD!!

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'81 MB 300SD, '82 MB 300D Turbo (sold/RIP), '04 Lincoln Town Car Ultimate

Sooner or later every car falls apart, ours does it later!
-German Narrator in a MB Promotion Film about the then brand new W123.