That thing needs a serious weight reduction. I'd honestly rather have a Rabbit or better yet, a kit car, and shove a chipped TDi in it.
3000# is pretty light for a sedan that size. This isn't anything like your modern Benz, it was their entry in the economy car market back then. Seriously, there is not much to do to lose weight on my car. No power steering, no AC. The only power accessory to remove is the power brakes. There's always gutting the interior or running without a spare, but that just sucks on a street car.
Maintenance on any older car depends greatly on a number of things. First is how it has been treated by previous owners, but also where you take it to get service done. Dealerships are never cheap and even less so for an older car that the mechanics are no longer familiar with. An independent shop familiar with the car is many times both cheaper and will get the job done better than the dealer, but be sure to find a place reccomended by other with a similar car. Myself, I don't trust anyone else to work on my cars and the DIY route is the least expensive way to go if you know what you are doing.
Having wrenched on them for a living and having onwed a 1980 (last of non turbo) W123 300D Automatic.....
Wonderful old cars. Becoming rare, many sent to Africa and the like from the US plus rot and time are taking their toll.
Not sure where the high upkeep numbers are coming from, BUT, it pays to spend more up front, if you can find a car with a FSH of preventative maintenace, then go for it. But most are ratty (newest W123 is 22 years old) old and tired.
The 300TDs are a bit more expensive, due to them being rare, and with the hydraulic suspension in the rear there is the added cost, but you have the added benefit of the wagon. The 300D sedan in normal and turbo (1981-on) form are much more common.
My 300D sedan with auto (all US 300D/TDs were auto, grey market you could get a manual) was not the quickest car, but fast enough. I drove it back and forth from Clarksville to Nashville at 90+ MPH on many occasions.
240s, good, slower, turbos were available in Europe (I had the manual for one around here somewhere).
Peugeot diesels are facing the same fate (age and Africa) but most everythign for them is still available on the net.
The other options on the W123 Merc in the US were the coupe (C, CE, CD, etc), sedan (gas and diesel) and wagon (T, diesel only so TD, T/TE Europe only) bodies, and designations. Motors in the US were 240D, 300D, 230 (don't belive Wikipedia) with carb, but rare as hen's teeth, and 280E. I did see a 280TE with a manual transmission once, astral silver, German car...a hotrod wagon if there ever was one.