That's a REALLY nice neo-Classic, Ziggy!
Neos were all the rage about 20 years ago, now you can't find them much anymore. Yours looks like it could use some work on the frame and particularly the differential area, but if you take the time to do it right and use the right products you may be able to will it to your son like your dad did for you. They never really go out of style, just out of favor.
Take a look at some of the Kit Car shows...you'll see a lot of nice neos, many of which may not look as nice as that one.
Your dad really had some cool stuff goin' on in his head!
Turbo diesel? Maybe...but if it were me and I were doing a neo-Classic, I'd try to do something like the car came with originally. Did those old Mercedes come with inline 8's, V-8s, V-12s...or did Mercedes have an diesel option back then?
Is that a 500K?
No matter what it is, it's WAAAAY COOL!
Cheers!
Dugly