My mecahnic is stumped...oil problem on my 1992 300SE

[oaklandw124]

Hi, I have a 1992 300SE with the 3.2 motor. It has 90,000 miles on it and I have a problem that I'm hoping you guys can help me with. A few weeks ago I noticed a good sized oil spot in my garage right under my passenger side front bumper. I opened the hood to find what I thought was coolant coming out of the overflow tube of the coolant reservoir. Upon closer inspection, it looked to have an oily consistency to it, so I took the cap off of the coolant tank. I found the brown, oily milkshake consistency in the tank, showing oil getting to the coolant.

14 months ago I had the head gasket replaced by my local mechanic. So, I immediately called him and told him what the problem was. He was surprised that it had happened and I got the car to him the next day. When he looked at it, he found that the engine oil was down almost two quarts and that a good portion of that oil was in the coolant tank. The oil on the engine dipstick was clean (ie. not the milkshake consistency of the oil in the coolant tank). He suggested two things: the head gasket had failed for an unknown reason or the oil cooler had become defective. He recommended that the cylinder head be removed to check the head gasket and also test the oil cooler. I said ok and he started the work.

Once he got down to the head gasket, he called and told me that everything looked fine (ie no visible compromise of the head gasket) and then he said he tested the oil cooler and said that it was fine. At that point he said he was puzzled, as those were the two main reasons oil could leave the engine and make its way to the coolant. Other reasons he gave, although more rare, were problems internally with the head or engine block. So, he put a new head gasket on and put everything back together. After flushing the oil and coolant a few times, he discovered that the same thing was happening...oil was getting into the coolant reservoir again and the oil level on the dipstick was approximately 1-1.5 quarts lower.

So, at this point my mechanic is recommending a new engine. I'm concerned that the original oil cooler that he tested could still be defective even though it passed his test. I have asked him to stop working on the car as I am concerned this problem might be beyond the knowledge of this mechanic.

So, my questions to the forum are, can there be any other reason for oil entering the coolant other than the failure of the head gasket or the oil cooler? And, what are the chances that an engine with 90,000 miles with no history of overheating or neglected maintenance would have cylinder head or engine block failure? And, can an oil cooler that passes a leak test still be defective once subjected to the operating requirements of the engine? The car is a cream puff and I want to save it, but I'm in this diagnostic repair for $2k so far and realize the value of these cars are rapidly falling.

Any insight, suggestions, or advice would be greatly appreciated. Thank you, Eric