What you need to determine to help you decide is how much you can get for it now. Hypothetically, if it costs you $8000 to repair it and you can sell it for $12000 in a year, then you should keep it if you can't get more than $4000 for it as is.

A counterpoint to the dealer warranty (and I'm probably in the minority) is that I'm suspicious of the kind of person that can destroy an MB engine. I know the engine failure wasn't your fault, but as a potential buyer I have to wonder what else is about to go in a dramatic way that isn't covered by a warranty.

I've had good luck with used engines and transmissions. I say have an engine shipped up from Atlanta-Stutgart or Potomac and have an independent install it. Chalk what you'll pay the dealer to experience.

Sixto
91 300SE
81 300SD