Joe:

Most likely a blown head gasket, but the heads crack on these engines rather easily if badly overheated, and white smoke usually means coolant in the combustion chambers. If the compression is gone, it will smoke white on startup, but go black when it warms up.

New (rebuilt) engine is in the $7000 range, total motor overhaul is about $5000 plus labor at my local shop -- seven hours R&R, 50 hours overhaul time (mine is a six).

I'm going to be ripping into my 87 300D with a similar problem (rough running, oil in the coolant, and excess coolant reservior pressure) -- at least a head gasket, probably head, maybe sleeves, etc. I will be doing the work myself, so shouldn't be out too much, but if you bite, don't pay more than 3 or 4 thousand.

Peter

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1972 220D ?? miles
1988 300E 200,012
1987 300D Turbo killed 9/25/07, 275,000 miles
1985 Volvo 740 GLE Turobodiesel 218,000
1972 280 SE 4.5 165, 000 - It runs!