Have you tried rotating the engine by the dampner pulley bolt with a ratchet? I too am thinking that perhaps the damage is confined to the rails and the rest of the engine is okay.

On the other hand, since the engine is out and has 171K on it, it may be wise to - at the very least - take the heads off and have them refurbished. With the heads off, you can then make a decision on what further needs to be done on the engine.

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95 E320 Cabriolet, 159K