I'd be nervous about buying any used 603 engine unless it was in a car I could drive before buying. The pressure in the cooling system with a "micro crack" won't appear unless the engine is loaded, like a 0-60 run at full throttle. Only major cracks or leaks will show up at idle or revving with no load.
Anyway, you can get the "improved" head from a 3.5L engine used for about $1000, plus another $400 or so in parts, plus labor (or some special tools if you DIY). A brand-new head is usually $1800-$2000 but there happens to be one on eBay right now for $1500. Don't bother fixing the old head or buying another 86/87 head. Very strange about the piston top being banged up. If the piston damage is not bad, and the engine is otherwise in good shape, I'd fix it rather than replace it. Or at least PLEASE keep the old engine around as you may need it for parts!
Prices for dealer rebuilt long blocks are in this PDF file (click link below). Note that one bonus when buying a dealer engine is that the warranty is valid at all MB dealers nationwide:
http://www.meimann.com/docs/mercedes/OM603_rebuilt_engines.pdf
BTW - I strongly recommend keeping the car and fixing it, unless you simply don't want it any more. Buying a different used car is always a gamble and since you've owned this a long time it's wiser, IMO, to repair it. If not I'll give you $500 to take the junker off your hands though.
Photos of my head R&R job are on my wbesite, click the "www" button at the bottom of this post...
HTH