uh... Last I checked the M103 engine in an 87 300e had an IRON block... not an aluminum block w/ plated cylinder walls... 2. The Block is NOT sleeved unless it was done aftermarket (unlikely). 3. if the Total Seal rings scored your cylinder walls-- its likely that during install they were possibly chipped, missized, or maaaaybe if they were chrome rings (very hard) they were incompatible w/ the plated cyl walls in that other guys aluminum engine(not adams car).
As for the V8-Eclasses... one can be had w/ relatively low miles for less than 15K at the auction (W210s) even if you end up modifying it-- its got way more potential (more cubic inches, more valves, more space for bigger rear tires, and no 2nd gear start to contend with) Good luck w/ that 500E idea though.. that'd be pretty cool