Sure looks like oil to me (nice photo by the way). It's the later (1987 on) OM603 engines with alloy heads that tend to have problems with cracks in the head. From what I've seen/heard of the earlier cars with iron heads (which includes yours) it takes alot of abuse to damage the head. My guess is it's a head gasket problem which while not common is not unheard of either. My suggestion would be to do a compression test to see if you have an obvious loss of pressure. If not keep driving it as long as you are sure you aren't getting any coolant in the oil and the problem doesn't get worse.

__________________
LRG
1987 300D Turbo 175K
2006 Toyota Prius, efficent but no soul
1985 300 TDT(130K miles of trouble free motoring)now sold