M117 and 722 are tired in my SLC. I have a few questions about a rebuild.
 

The M117 and auto in my 1974 SLC are getting tired and are going to need an overhaul in the next 5,000 miles if I'm nice to it. It's burning oil and I'm getting a bottom end noise when its cold coupled with low oil pressure at temp. I've built a few high strung SBF, SBC, and Pontiacs and done stock rebuilds on M113 and M104 engines so this process is not new to me but there seems to be an aura of fear around the M117 rebuild.

I feel I have 3 options:

1:Factory 450/722 3 speed rebuild. Looking online all the parts seem to be around the same cost as Pontiac stuff and I feel a $1500 budget is reasonable if I assemble it myself, the bores aren't trashed, and have the machine work done by people I'd normally use. Is that in the right ballpark assuming the fuel system is more or less ok how it is? If the pistons are done, which they may be given the bottom end noise, that budget is shot.

2: 560/722.3 combo. Will it bolt up? I could pick up a 560/722.3 next time a 560 W126 ends up in a junkyard in this part of the country and spend next summer piecing that together and drop it in over the winter. I understand I would have to convert to K jet but that's all available and an upgrade from the D-Jet anyway. I would prefer to do a factory 560 rebuild and swap rather than a 450 3 speed rebuild. I figure the same $1500 for a rebuild plus another $300 for the powertain at a U-pull yard and $500 for various swap parts totaling $2300.

3: American swap. I have a bad Pontiac fetish and I would consider a 455 if Mercedes stuff is astronomically expensive ($3000+). I figure that would cost about $2000 based on experience.

Forget the Pontiac and do a Buick swap if you go that route. Less weight and more power from the Buick mill.

I'd go the 560 way.

Rebuilding the M117 can be an expensive way to go. The parts aren't all that bad but the hidden snags can mount up. Threads in the block are notorious for stripping, bolts in the manifold/head have a nasty habit of being corroded into one piece, etc. Nothing insurmountable, just added expenses which quickly add up.

Just my opinion of course.

If your choice were to be a swap, you are entirely on your own; but with this caveat:
measure carefully the overall width across the exhaust manifolds/headers.

Mike D.'s option of the 560 is the least cost alternative in a M117. Consider also the 420 M116; it is the low deck version of the M117. In either case the installation of the complete KE-jet system will either keep you out of the bars for many nights, or send you there on a regular basis.

A 560 sourced from a W126 chassis will come with an exhaust system that is not compatible with the 107 chassis. An exhaust system from a 560SL would be required.
OR
If a 420 M116 is used, your existing exhaust system will bolt on. [The heads on the 560 have an exhaust manifold bolt pattern that differs from that of your 450 & the 420.]

The 420 as delivered in the US is a bit detuned from the euro version, yet is quite a bit tuned up with respect to the US 450.

The 560 exhaust doesn't bother me much. I'm planning on making some headers for out of some of the old ones I have from other projects. I'm sure I can cut and weld something.

K jet will be tons-o-fun but as far as I understand it the D jet isn't something I can tune to work on a 560 and I would hate to put a carb on it when I have access to (primitive) fuel injection.

As far as the Pontiac goes Mike, I like the torque and the blocks are both "middle weights". The Pontiacs also have monster 3.25" mains.

You are correct about the D-jet; those systems are analog, and engine specific. There is no provision for remapping.
An alternate approach would use the distributor based ignition system of the 560, and a Megasquirt/Microsquirt controller for the fuel, using the engine speed signal from the 560 ignition. From a wiring standpoint, this would be simpler than the KE. It also would not require the dual fuel pump installation of the KE.

I know a guy with a 560 in an SLC and he says it isn't as powerful as his 5.0 SLC (which he'd sell for about $3500 including euro bumpers and headlights).

Keep in mind that the 560 differential is probably about a 2.27 while you probably have a 3.07 in your SLC. So the quickest and easiest thing is probably to just drop in another 4.5 d-jet engine. They are all over the place for probably $500. I've got one I will sell for $500 assuming you've got all the functioning d-jet bits you need. Hell, I scrapped a d-jet 4.5 block just because I couldn't find anyone to buy it. Too bad I didn't see this before last weekend when a friend was taking a trailer back to Chicago through Indiana. I can verify the compression on the 1973 450slc I'm parting out and slap it on a palat for you if you want. Shipping from the Phildelphia area would be your issue though.

Is that a real 450SLC 5.0 or a 5.0 in a SLC?

Also I'm not ready for an engine right now, this winter would be the earliest, but I'll make sure to save your username and I might try to get an engine off you if you still have it.

1981 380slc 5.6 conversion (not so fast)
Real 1978 450slc 5.0 107.026 in Texas it is rusty, but runs well and timing chain service recently done.

How rusty? You know more about these than I do but that still sounds cheap. I'm actually not interested in buying it since I already have a SLC that I paid $2000 for (non running at the time) but its clean but wow I thought real 5.0s were pretty sought after.

He doesn't want to sell, but needs cash at the moment. He wanted to bring it back to original spec despite being color changed in both interior and exterior. Personally, I would make a rally replica out of it.