Some people consider these to be the best Mercedes ever built. That might be a bit of a stretch but I bought a 420sel last year and have been very pleased with the car. The cars are generally pretty bulletproof if the maintenance has been kept up.
.
Read this article for a good background on what to look for in by a W126
.
http://www.mbcoupes.com/buyersguide/buyersguide.htm
.
Just note that this was written in the late 90's so some of the information on pricing etc is a bit dated.
.
Don't be taken in by the appearance of the car. These cars are well built with high quality material that hold up over time. An afternoon of sweat labour can turn a piece of crap into pretty presentable looking cars.
.
One thing to look out for is for the rear window leaking. These cars are notorious for having leaks develop in the lower left or right hand corners. To test spread some newspapers in the trunk and then run a house over the back part of the roof and the trunk. If there is a leak it will show up as drips on the newspapers. If its under the hinge there is a window leak. If it's under the anttenae ( spelling is wrong I know) its likely the antennae gasket, and if its by the rear taillights its the gasket around the light. Antennae and tail light leaks are generally cheap to fix. Rear window leaks can be pretty expensive.
.
The other weak area is the head gasket which seems to be an issue with Mercedes in general. When you have a PPI done make sure they check for the issue. Its not that common a problem but it is common enough and somewhat pricey to correct on these cars.
.
As for pricing I cant really say as prices for these cars are all over the place but, if the car has full maintenance records, is as good as you say it is, and comes out with a favorable PPI $5500 sound pretty reasonable to me. Just remember the adage " a cheap mercedes is a very expensive mercedes" . Better to shop around and pay for a well kept example than one with a poor or no history as repairs can kill you.