Diseasel300, thanks for your comments as well. I am pretty much sure that the oil leaking is worse now that I replaced the valve cover gasket.

I compiled a checklist of areas to be cover, just in case, to be send to a mechanic, if I decide to do this. Here is the checklist below:

My 1994 Mercedes E320 wagon needs to be diagnose and/or check out on the follow areas:

1. Smelling burning oil and smoke locations. 2 or more possible locations of smoke are by the EGR Valve area on the exhaust manifold near the back of the engine and underneath the Mercedes on both the driver's side and passenger's side, possible by the exhaust muffler and/or front end of tail pipe. Determine what and where the source is coming from and the exact locations of smelling burning oil and why. Does the EGR valve needs to be replace? What else needs to be done to correct the above issues?

2. Check for all oil leaks and location of oil leaks. If there are any oil leaks, what needs to be done to correct the problems? Check the oil pan gasket, head gasket, front cover timing seal gasket, and transmission gasket. Also, check the rear seal, if possible from the transmission bell to the rear motor for leaks.

3. Check the wiring of the oil sender unit sensor near the oil pan plug. See if wiring connections and connectors are tight and not loose inside the oil sender unit sensor. Check/ inspect the wiring for torn, cracked, exposed wires. Check the voltage on the oil sending unit sensor wire. Also, check if the oil sending unit sensor is defective or not. Oil sending unit warning lights on the instrument cluster panel kept going off and on when driving. If there any problems with the oil sender unit sensor issue, what needs to be done to fix the problems?. Does the oil sending unit sensor unit need to be replace?

4. Check the oil pressure unit sensor, its connecting wire for loose, frayed, exposed wiring connector. Check the voltage on the oil pressure unit connecting wire. It is located in the front of the oil filter housing near the master brake fluid reservoir. On the instrument cluster panel, the oil pressure guage keeps fluttering up and down. Does the oil pressure unit sensor need to be replace?

5. Check the oil pump to see if the oil pump is working ok.

6. Check transmission fluid level in the dipstick and leaks if any. Engine needs to be running to get accurate reading level on the transmission dipstick. If found to have a leak on the transmission fluid, what needs to be done to correct the issue? If no leaks are found and the transmission fluid level on the dipstick is low, how much extra transmission fluid needs to be fill until appropriate transmission fluid level on the dipstick is ok?

7. Check the transmission pan for leaks, stripped bolts, etc. and the transmission pan gasket. Does the transmission pan gasket and filter needs to be replace?

8. is the head gasket in good shape? Check for any signs of leaking oil on the head gasket area, especialy the rear end of the engine. Does the head gasket need to be replace?

9. Check the shifting gears for hesitation issues, especially the drive and reverse shifts. Very loud changing gear shifts. What is the issue, if any, and how can that be fix?

10. Check the fuel pressure regulator. Is the fuel pressure regulator ok or defective and needs to be replace?

11. Check the engine compression. Is the engine compression ok?

12. Check for vacuum leaks near the throttle body, intake manifold areas using a "smoker" through the vacuum lines to detect leaks and if so, should see smoke coming out of the vacuum lines. The Mercedes have high idling issues.

13. Take pictures using my camera of the oil leaks locations after finding the correct diagnosis as well as burning oil smell and smoke. In additon, take pictures of the vacuum leaks, if any,

14. Any other areas that needs to be check that are not in this checklist?

15. What would be the estimate total cost of diagnosis on the above issues?

16. What would be the estimate total cost including labor and parts, if needed, on the above issues that needs to be repair?

Comments, anyone?