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I have a '91 300SE with 97K miles on it and I love it. It has been 100% reliable. I bought it from a friend 4 years ago who had it since 30K miles, and it was 100% reliable for him too.
I do my own maintenance and recently (at 90K) did a full tune up and it was a true pleasure to work on. Other experiences vary, apparently, but my M103 runs perfectly. I have a pretty good knowledge of CIS engines and did have to tweak the base fuel mixture a couple years ago to get it running smoothly again. So you may have to know a little about CIS engines, or know somebody who does, to have it run smoothly. But there are a bazillion M103's out there with good forum posts on diagnosing and repairing every aspect.
Power is not too bad, and I have owned a 560SEL and so can compare directly the W126 6's with the 8's. I agree it isn't the greatest on the highway, it really needs and overdrive! But around town, where I do most of my driving, it's actually just about perfect with it's short gearing and rear end ratio. You just need to have a slightly different philosophy when driving it and not expect too much. I just sort of "ease" around town, and the engine is buttery smooth and quiet. As long as you don't ask too much of it, or think it should drive like a sports car, then it will give you a great around town driving experience.
The short wheel base make a surprisingly BIG difference in the way the car handles even around town. The short wheel base W126 isn't exactly a sports car, far from it, but it isn't bad. Decent turning radius, and the whole car feels simple and robust. The long wheel base "L"'s are just huge boats in comparison. Don't know why it makes such a big perceived difference, but it does. I like the 300SE a LOT and the short wheel base has a lot to do with it.
Overall, I think the M103-powered W126 300SE is a great car, especially around town, not so much on the highway. It's the mating of two classic Mercedes designs: the W126 with the M103.
Oh, and I get 17-18 mpg in town and 21-22 on the highway.
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1972 280SE 4.5
1984 300SD, 250K
1991 300SE, 89K
1992 300D (330K miles when KIA'd by mother-in-law 8/10/09 - still sitting in my barn)
1994 E320, 109K
1995 E420, 60K
Proud Member of the Mercedes Benz Club of America - Idaho Chapter
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