300E 89 205k miles - head gasket

[think300E]

Hi all,

I have owned a 300E 89 for a couple of years and due to commuting have put about 103k of the 205k miles myself (about 160miles every day).

For the past 1 1/2 years I have not driven the car much due to telecommuting, mainly quick trips to the store and once a while a longer 40mile trip, otherwise the car has been parked. The shorter trips have probably been 2-5miles. There are times when in a week I may only drive the car on Saturday.

Last time it had service (see below) was some time before I stopped driving every day.

Last Friday my wife and I were getting ready to go to the store. Turned the car on and a second or two after the engine was running we heard a loud tack tack sound. To me it sounded like something slip and started to make that noise.

We didnt go anywhere that day, instead what I did was open the hood and see if i could tell where the noise was coming from, couldnt pinpoint it (ie. was it towards the valve cover or the belt tensioner)

Noticed that the coolant level was down, and it seemed to be low in oil (car in general uses oil and it has a leak but didnt know where exactly was leaking).

Added coolant (non mbz / premix 50/50 from Kragen - that is what i had available), added 1/4 quart of oil and restarted engine, the sound diminished, i could hear it but below the normal sound of the engine.

Next day went to the store and purchased some 20/50 (before i was using 10/40, car was serviced before w/ 20/50) and added just a little bit of that oil to full mark lvl in dipstick

Had a 30k service done in the car yesterday (included replacement of oil/filter etc), car is quiet, while the car was being serviced the engine was degreased and mechanic said located the source of the leak. Head gasket - front right side

Suggested a new gasket and since the head needed to be removed, they suggested to do valve job as well. (total assesment $3,500 per dealer but not a firm price as they said they do not know what else they may discover once they remove the head).

We were planning to take this car on a long trip 2k-3k miles and are concerned about the head gasket. We are also concern about the large quantity of repair costs, however we would like to keep the car as the body is in great condition and the interior is as well - car is paid for and car insurance is low. Other things car needs are front shocks and A/C work (blower, which i will try to fix myself).


Questions:
Should the headgasket be changed and only the head gasket? If only headgasket was changed how much $$ average does that cost.

Since headgasket is being replaced I guess it makes sense to do a valve job given the miles, would asking them to only change the seals save money and add some life to the valves per se? or should a complete valve job just be done since the head is coming out anyways?

While researching this issue I came across rebuilt engines and rebuilt heads. Prices for the engines were around $3600 plus 400-800 core and for the head around $800 + 400+ for core.

Which made me wonder if one is to spend that amount of money why not just get a rebuilt engine, on the other hand it all seems overkill since all I currently seem to have is an oil leak.

Suggestions and advice greatly appreciated.