The blow-by sounds pretty typical for an engine with 223K. That said I suspect it would run fine but would use a quart of oil every 500-1000 miles. If you can live with this I think you should buy it. I've looked at lots of W123's here on the east coast and rust-free examples are starting to get a little rare. The 85 turbo W123 is supposed to be one of the best years (if you don't get the ones that have the california trap oxidizers)

The price seems about correct if the car is as you describe.

Good luck

Tim