Glad to see some interest brewing here.
As for the center bearing and all that concern, two thoughts:
1) Folks on both sides of the pond have put 560SE V8s into these cars, so I'd say you've got some leeway. The W123 chassis was designed with a V8 in mind, but the car was literally so popular that MB couldn't keep up with the demand of the 'boring' versions. Although the 280E with a stick is hardly boring
2) Screw all that - you're going to need a custom driveshaft anyway. Might as well start with the proper Ford part in the front and choose which pumpkin you'll be going with, add appropriate part, measure shaft, order.There are folks at the Peach Parts, benzforums.org and/or Super Turbo Diesel forums who have done a lot of research on the chassis and apparently there's a typical Dodge part that mates fine with the rear pumpkin.
2.5) The pumpkin is stout but no lsd available. Possibly, just possibly, there's a stock Ford driveshaft that would be of a correct length to use with an 8.8 IRS pumpkin. Would require custom axles (Ford inner MB outer) but that's probably cheaper/easier than getting a good limited slip for these cars. Unless you want to try sourcing an AMG part from the 70's.
240D's have something akin to 3.68 or 3.90 gears depending on the year, the shallower gear probably more likely.
300D's came in two flavors, turbo and non, non were ~3.23 turbo ~3.08.
Remember that this car was designed with 14" wheels and no optional upsize. I'd go, personally, with late model C230 wheels in the 'torque thrust' style, 17" all around. Fit the wheels first and then start messing around with cutting springs (absolutely ok on this suspension), the front springs sport 14 coils, and I believe the rears are 11. You can -3 front -1.5 rear and get a really, really good sporting setup, ideal even, but be prepared to spring for the skid plate to protect the pan, too.
Might get around it depending on the pan you go with but most likely it'll be the 5.0 double sump and believe me, pulling over and shoving Water Weld in a hole bleeding hot oil gets old quick. However, I was running lower profile tires on stock wheels and some 45/50 series tires on 17's would likely raise it up a bit even with the same setting, and I have no idea how better/worse a 5.0 would be in the same car with the same springs as yet. I also have no idea how rubbing would be an issue with said 17's but MB and other Euro makes tend to make the suspension do the heavy lifting, and not the tires, so if you go with stock C230 sizes you'll likely be ok.
Personally I'd take it slowly, I don't know of anyone who has 'seriously' done this and posted his settings, ie like 'serious' as in went to the auto cross or track day and posted whatever time in a field with X cars of Y type.
I'm thinking, after having lowered 3 of these cars, that when I get around to 5.0'ing a W123, I'm going to try and add wheel and keep as much wheel travel as possible. The 14" factory rollers run 185/70/14s on 240D, 205s on 300Ds, and they're balonies, to be sure. If you want handling get rid of the obvious slop (ie the giganto sidewalls) and proceed from there. I'd be surprised if muscle car folk especially weren't happy with a nice, mild front rake (like -1 or -1.5 coils) and stock rear.
Lesjofors (sp?) makes a heavy duty rear spring that folks use to get rid of the SLS suspension on the wagons and it would probably help quite a bit to control the rear and make the car more neutral without having to lower it and lose utility (not to mention camber and thus contact patch in a straight line - the rear suspension is NOT adjustable for camber, so if you lower it, you'll be negative all the time). The Lesjofors springs would likely have to be cut, refit, and cut again in small increments to really get it right.
However anyone who has done a similar project in a car with truly zero aftermarket options (there are a few spring companies out there who offer springs but they often - shocker! - require trimming to fit) the mere ability to actually cut and adjust springs in such a way is a blessing. And yes, I've driven my lowered cars, hard, my old 240D was quite a nice canyon carver. I had all three cars for extended times and no problems developed, and I've not yet heard of anyone complaining of a failure after properly cutting the spring, how-tos are all over the above mentioned forums, as are debates on how good of an idea it is.
There are other concerns - unrelated motor/trans going into unrelated body, surprise! - but I'll hold off here since it's already a huge post