When he says "idler pulley" I wonder if he means belt tensioner pulley?
That is a common wear part on your car, and it's not unusual for it to need replacing. That said, I have never seen it cause the shifter to make noise. My C230 has been through one, as has my Dad's 1998 C230, and our now-gone 1998 E300 also had one replaced. On all three of those cars, there was noise from the pulley, but nothing from the shifter.
This warrants further investigation, and I'd probably seek another opinion than the body shop mechanic.
Is the head gasket leaking? It's pretty unusual for the M111 DOHC engine. However, given the length of time your car has sat, the gasket may have worn due to inactivity. Though it is a cousin to the M104 2.8 and 3.2L engines, the 2.2 and 2.3 M111 four bangers do not seem to suffer from premature gasket failure.
Do you have oil in the coolant?
1998 C230 "Black Betty"