If you really like the car and want to keep it put a new motor in it and do not waste money on your current engine. I have a 77 240d, had it for 22 years, two years ago I put a new motor in it after 300K miles of city driving. I bought the new motor from Houston MB dealer, long block complete with everything, 36K warranty, the price of the moter was $3600 plus installation. these MB engines come from Europe, I believe that they are assembled in Denmark for MB, and are as good as the new engines that come with the car originally.
I strongly recommend not to rebuild your existing engine locally, it will certainly be more expensive & definitely not as good as the ones MB dealers carry.