Hi
In July I did a bunch of A/C work to my 89 300SE. Its a W126 similar to yours.
I am not an expert on AC but will give you some of my experiences.
I purchased the car without working AC and put it back to an R12 system. It works great in Washington State! It was more money for the refrigerant but many on here say that 134 does not work well. I never tried it so I can only speak from the R12 side of the fence.
As to your questions:
1. The compressor works but is 8-10 years old. Should I replace it, too? Consider I am replacing receiver/drier now. - You might consider it but if you go the 134 route you have less to loose if you have to evac and recharge it later. I had no idea when mine last functioned so I replaced it. It was expensive.
2. Does 134 work well... - I cant tell you from experience but if you search on this site long enough and filter out all the "Junk Refrigerant" threads I did not get a good feeling for 134. To me it was tempting from the cost aspect. My r12 was $60 a pound and needed 3 pounds so you do the math! Even though i complain of the cost it works well and I am satisfied with it. Your AC man can get it or you can get certified online with the EPA and get it on your own! Cost varies. Check ebay. Search on this site for EPA certification.
3. I've got the two A/C lines open... - I had mine open for 2 weeks with no adverse effects. I replaced all the orings in the system and a new expansion valve, receiver dryer and flushed the whole system. I used the expensive flush compound from Napa. I think it depends on how well you get it sealed and how long you put a vacuum on if for. I bought the $100 vacuum pump from Harbor Freight and a used set of AC gauges. I put a vacuum on it for over 4 hours. I did that before I installed the receiver dryer (Note that I used a fitting where the receiver dryer was). I then opened the system again to install the receiver dryer and then put it under a vacuum for another 4 hours. The next day I drove it to my indi mechanic for a charge. Has worked fine since! YMMV!
There is a lot of info on this site. Search and read my friend! I guess I went the purist route and made mine stock. I think my AC in the car works better than the 134 system in my 01 F150 and even my wife's 05 Honda CRV. Not sure how old you are but when I was a little kid I remember freezing my butt off in the front seat of the family car which was a 72 Chevrolet Caprice and that was R12.
BTW how was that expansion valve on your car?
That's a bad spot for something to work on with fittings!