Never been in a w123, but I've owned two w126 300SD's and driven a third.

From what I can tell they're a bit bigger, little "fancier", bit better styling. The drive trains are the same. I personally prefer the w126 big time, but I'm also 6'3" and like almost everything in my life to be at least as big as I am.

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1981 300SD - 283,000 KM's at purchase, 360k+ now. Engine replaced at 311k. 16" CLK wheels, w126 gen II cosmetic upgrades, late w126 leather interior. RIP. Parted and gone due to fire

1987 300SDL - 243K miles and counting. In winter hibernation!

2001 Ford F250 Super Duty "Platinum Edition" Lariat 4x4 7.3L turbo diesel, 295k+ miles, various mods for reliability and performance.