You might want to check your engine compression. If there is enough of a difference (imbalance) between cylinders, nothing you do will bring the idle to complete smooth.

Dkr.

This is something I have never done so maybe a compression tester is in my future.

Lets say there is a substantial imbalance in compression values between cylinders, whats a reasonable course of action? What would be considered substantial imbalance. I assume no OM617 out there - unless meticulously maintained would have exactly equal compression on all cylinders, right?

FYI, my car starts excellent in the morning - cold/hot/whatever. I have a upgraded pencil style glow plugs. Never changed the relay so the glow cycle is just as long as it used to be with the old loop style ones; however the starting performance is amazing. Wouldnt this indicate decent if not good compression?
Also, from your experience - is it possible to have smooth power delivery/more power with unequal compression, as long as everything else works fine?

MXFrank, thanks for the suggestion. I am due for another valve adjustment in a couple of months. I ve done valve adjustments myself in the past and they were never totally perfect. Now I let my local mechanic do it since hes much better at it and is an OM617 guy as well. Its not too expensive and is worth paying to get it done right for me. Hopefully the next adjustment will improve things a bit more.

Thank you all for the suggestions. Any other advice would be greatly appreciated.

The car is old. I would want to make sure the fuel pressure is adequate in the base of the injection pump. When low the idle is not quite as smooth as the power balance seems impacted. A quick test is to close the relief valve fuel line from the relief valve. If the idle is a lot better do the relief valve spring. I was also wondering about air getting in the fuel. It has a more profound effect at idle.

Something that should be checked anyways. Many times there is a problem with a sagged fuel pressure relief valve spring with age.

Or the fuel lift pump is getting tired but I doubt this from parts of your description. It is still possible but not that probable. I think I would borrow or get the cheap harbor freight compression gage and get a baseline on that engine. If the relief valve first test show shows no difference post that as there are subsequent follow up tests. Since it starts very well cold is a good sign though.