If I were a swapping man with a dead gasser w126, it would receive one of the larger GM LS v8's in a relative heartbeat. And have a ton more power and get noticeably better MPG afterwards I strongly suspect. It might actually increase the value of the car which many cross brand swaps do not.

That said, sixto's suggestion is likely the better-er way to go. Later cars do feel more modern and nicer in general despite being so similar.

Assuming it'll clear the steering box anyway, might become a paint in the rear if not.

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One more Radar Lover gone...
1982 VW Caddy diesel 406K 1.9L AAZ
1994 E320 195K