88 300E cuts out at 4500rpm

I bought an 88 300E with 117K on it. It fails emmisions test. Took it to shop and they said the engine cuts out at 4500 rpm and there is a rattling noise in the top end and a little puff of blue smoke. The shop said the next step is to inspect the top end for problems.

What does this sound like (besides me getting ripped off on my recent purchase)? I did get the car 3000 below book so I don't mind putting some bucks into it if I have to. The question is what could the problem be and how much will it cost.

Any ideas?

Thanks,

AJ


01 toyota tundra
00 toyota camry
88 mercedes 300E