It really all depends on how bad your engine is have you checked compression in the cylinders? oil pressure? it may just need a simple rering and oil pump, or could need the whole thing rebuilt that will be the starting point for your build but worse case I would guess 5-6000$, but somethings to consider in the mean time.

1. what sort of shape is the body/interior? good, great, okay?
2. who will do the engine work, you/the shop?
3. how much do you love this car, is this something you will keep forever? or will you get tired of it? and remember no matter how new the engine/transmission is the rest of the car will still have 220K on it.
4. some advice find a reputable place that specializes in MB transmissions/engines, these things are not for the amatuer to get into.
5. start pricing parts, then you will know what a fair price is for everything.