Now you've got my wheels turning.
whunter told me he has a 4-speed tranny that he would sell.
So I'm pondering the cost of the valve job (I think it may run about $750 or maybe a bit more), plus the tranny & a pedal cluster, etc. It may be worth it. I would plan to keep the car for many more years.
I'm guessing the 4-speed 4-banger would get better fuel economy than the car I was thinking of upgrading to, a 300D turbo (all of which are slushboxes?).
The alternative that someone recommended of getting something like this SC beater 240 with a "good" engine does not appeal to me. (a) I don't like to roll the dice by not knowing what the internals look like; such a car may also need a valve job, or worse. (b) When I pull my head I will see what the bores & pistons look like, and when my head is redone I will know that the casting and valves, guides, seats, etc. are satisfactory.
BTW, a colleague from Germany called his technician friend over there who has specialized in M-B Diesels for years, and he indicated that low compression would not, as I suspected, produce knocking. He said the first thing to look at is the pre-chambers for a broken ball thingy (the part suspended in the prechamber). He encounters a lot of broken ones on the older engines. I have looked at #1 & #2; I will now look at 3 & 4. He also recommended checking and adjusting pump timing. He said this should be done every two years. He realized this would not produce the knocking in only one cylinder that I have, but could be a factor in my needing full fuel to start the car ever since I got it in '98.

__________________
Now you're suckin' Diesel!

'88 300SEL
'92 300D 2.5 Turbo
'96 Lincoln Town Car. The Jazzmobile.