But you said you have slower performance... how would you even know if you only have a lack of power at idle? At idle you are using no power!

OK, I don't know your model in particular, but I've been a mechanic in a previous life and I'm a mechanical engineer in the engine development business... so I'll stick in my .02.

Idle vacuum should be very high. It sounds like yours is low. The fluctuation I wouldn't worry about just yet... if the engine is idling poorly, the fluctuating idle speed will cause a fluctuating vacuum reading. Low vacuum... it isn't because of a leak (although you might still have one). It's because the engine is idling with more throttle than it should require. It's doing this to take in more air and fuel because it is running inefficiently. Why is it running inefficiently? That will be the key to solving everything. Possibilities:
Incorrect A:F ratio. Probably not, because you've got on O2 sensor, no fault codes, and you've been through the fuel system. Still could be a subtle cause like bad intake valve guides, or a faulty PCV system (that's why someone posted about the dipstick and oil cap). Possibly something with the evaporative emission system, but I have no clue how that works on your car.
Exhaust restriction. You say you have checked the cat, also it would manifest more as running out of power with a slight lag as you accelerate.
Retarded or erratic ignition timing. I haven't seen that you've checked this. Put a timing light on it, see where it is at idle. See if it is stable. See if it advances sharply and cleanly when the engine is revved up. Erratic and retarded timing would cause all your problems.
Poor compression. Your engine looks beautiful. It could still have screwed up cam timing which is essentially like having poor compression. Especially possible because the system has obviously been molested. (No reflection on your mechanical capabilities, but a realization that something that has been touched is more likely to have a problem.) Retrace your steps. Why was the head off? Are any of your valves bent or sticking? Weak or broken valve springs? Tight valves anyplace? Bad hydraulic tappet(s) making a valve stay open?

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1987 W201 190D