I had an old 300D non turbo wagon with the same engine trouble. It was an oil burner. The compression showed good.

I pulled the engine and disassembled it. What I found surprised me, but after I talked with other techs, I found it to be normal.

The engine cylinder walls were ridged at the top indicating wear.

I re-sleeved the engine and installed new rings and performed a valve job. The engine is now running on the 5 year perfect. I would suspect that at another 200k or so, it will be needed again.

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Benzmac:
Donnie Drummonds
ASE CERTIFIED MASTER AUTO TECHNICIAN
MERCEDES SPECIALIST 11 YRS