I'll agree with your friend that your problem is the O2 sensor. I just went through a period of about a month on my '87 560SEL with extremely bad mpg (7 vs 17) and after replacing plugs, wires, cap, and rotor, I finally got to the O2 sensor and things seem to have improved dramatically.

There's still a little sign of roughness and the smell of rich exhaust but not the clouds of smoke that would follow me and the smell of someone pouring gasolene on the ground that I had had. I have an appointment next week with a local shop that has been recommended to make the remaining fine adjustments that I don't have the tools to do.

jlc