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The M104 inline six is an AWESOME engine, despite the headgasket problems. It's from the "old school" Mercedes designs, meaning way-way-way overengineered. We have it's cousin, the M111 in our C230, and it's "dad" the M103 in our 190E, and they are terrific engines. At nearly 400K our M103 runs tight and strong.
The main reason I would shy away from a 1997 model is the early build 722.6. If it's been replaced sometime, then you're probably safe, but if not, then you're likely headed for work on the transmission.
The 1994 and 1995 W124 E320's are CHEAP now, and great buys. They have their quirks, but they are terrific cars at low prices. The trick is to find a well cared for car.
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