I faced the same decision about 1 1/2year ago with my aging 1989 260E, with close to 400k on the clock. I bought this car back in 1991 (almost 14 years ago) with 20K. on it. I looked around trying to find a newer car (94--95 W124, or a BMW or a Volvos)I even looked at a few Acura. Nothing fit my needs, considering the amount of money I would have to spend to get another used car..
I Finlay decided to revamp my old trusty '89.
Valve job, Rear suspension bushings/arms
Front ball joints and tie-rod-ends, steering damper. 4 new shocks, Engine and transmission mounts, radiator, a new alternator, full tune-up, replaced all lubes and filters, replaced all vacuum tubings, brake job on 4 corners, 4 new tires,...and more.
This was the best $4,000. I ever spent on a car.
In a few weeks, the car is going to the paint shop (still have the original paint on it.
I will keep this car until it literally falls apart......in about 10 years.