I would dump it. It can not be fixed for less than it is worth. A rebuild that costs 3k sounds expensive but is actually cheap if it was done properly. By the time its in the car you will have too much in it even with free labor.

We currently have a 240D standard trans that we rebuilt the motor in last winter as a filler project. We did it because the body and interior were so nice. We have been offering it for sale for less than the retail price of the motor overhaul (with all the details) and it's too much money.

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Steve Brotherton
Continental Imports
Gainesville FL
Bosch Master, ASE Master, L1
33 years MB technician