I'll let the dealer do the final diagnosis but it seems more like engine oil rather than ATF fluid in the coolant. I use 15W-50 Mobil 1 and the stuff has a unique texture.

As for the chain, the car has had frequent Mobil 1 oil changes since the 1,200 mile mark. It doesn't use a drop of oil between changes. I suspect the chain is in good shape but I'll leave it up to the dealer to decide about replacing it.

I can't understand why Mercedes didn't have this problem fixed by 1991.

Incidently, I had a 1984 190D that had a leaking head gasket. The dealer wanted $600 to replace it. I had him retorque the head and drove the car for another 11 years with no problems. I doubt that will work with this problem.