Thanks for the input. I'm assuming this to be a head gasket considering the amount of oily goo in the expansion tank. Somehow a black sludge poured through the exp tank cap down the side. This is something that popped up in the past week because I check all fluids on a regular weekly basis. I had a coolant system flush six months ago because the level sensor had corroded badly from the prior use of lousy coolant. My mechanic, also a dismantler, claims that non-Mercedes coolant is a major culprit in heads going bad.
My wife drives the car daily to work. The car smogged extremely clean a couple months ago. Oil barely shows dirt after 3000 miles, when I change it. I took the car on a short drive and oil press was 3 bars and the car didn't heat up past 80c. I didn't detect coolant on the dip stick. I actually would store the car and save it for later but oil in coolant hoses is not good.

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W124 The Ultimate Taxi