Gilly last I checked the 617 was still in use in 1985.
Adjust the valves, do a diesel purge, change all fluids and filters. Use German filters and a good diesel rated oil.
On older cars check the engine mounts, if they are original they need replacing.
The oil cooler hoses are a known problem area, if they blow you lose the engine. Use only OE hoses about $200 for both.
Go over the car and see what it needs.
As to a nicer wheel and tire package, try Tirerack.com. Luke works for them and is a mod in the tire forum and he can help you. They offer about 22 different wheels that will fit a W126, some need spacers. Be carefull the 18in wheels will need expensive H&R spaces ($300) and will rub a bit if you have a lot of people in the car. 16in is a great size for these cars.
Enjoy.