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Having seen a few engines apart, I can say that in my limited experience, the line of MB engine with iron blocks and alloy heads produced post 1985 are some of the most robust gasoline engines ever shoved under the hood of a car.
The M111, M103, M104 and M119 are all very tough engines and I've yet to see one fail that hasn't been badly abused. Each has it's quirks, but they're minor and in no way cause complete failure. The M103 has the slight weakness of a single row chain, but in it's SOHC configuration, the chain is short and durable. It should be watched a little more closely than the chains in the others.
Check the cranks and journals on those engines. The V-8 parts from SBC's look weak in comparision.
As to the head gasket issue, pretty much every maker that produced mixed materials engines had difficulty mating aluminum heads to iron blocks. BMW, Toyota, Subaru, and others, have had this problem.
MB has been under intense pressure to compete on price. They have become a mass-market "luxury" maker that has to compete against Lexus, Infinity, BMW, VW, Audi, GM, and they no longer see an engine designed to last 500K or more as a sales advantage. Not many people are keeping their cars past the last lease payment anyway. That's not to say that the M112/113 engines won't last a loooong time, but the idea of cars as disposal items is becoming more and more prevalent.
Also, for those that plan on keeping their cars, MB would much rather sell you a crate engine than have people opening them up and fixing them.
Back to the topic...
It's obvious that the repair was performed incorrectly and should be rectified. When the head is back off, any damage to the valves and pistons will be visible. The M104 is an interference engine.
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