Hi Wesley,
Where are you based in NL, I have a brother living with his family and children in Rotterdam since 1992. Been visiting him, wife (she is Dutch) and boys for couple of times
Based on my experience when one has 2.3 or 2.5-16 with 2xx.xxx km or more & engine problems (oil consumption, lower compression) and when one would just take cylinder head off and replacing it with a new one / a rebuilt one all the problems would of been solved in 9 out of 10 cars. Of course assuming that KE Jetronic is OK and well tuned and that valve-chain mechanism is OK. Don't worry about your head gasket (yes they also can get damaged in 16v's) as replacing / removing cylinder head means a new head gasket every time (cca 100 euro)
Always remember that the head is the weak point after all those years in 16v and much less likely the bottom part (engine block). Also inside the head the greatest wear occur on valve guides, valve seals, exhaust valves and their seats. In engines I was dismantling with a friend intake valves were always perfect as their seats were too. Intake guides had also way less wear compared to exhaust ones. Exhaust valves are under much more stress and also Mercedes-Benz factory themselves was wandering around which to choose during production years (as with chain tensioner, that was the same case) changing part numbers 3 or 4 times and using different grade materials as well as shape to cure the problem!

Now standard exhaust valves for all 16vs are Evo II valves
Connecting rods as well as crankshaft are forged there is a little or no chance to damage them in standard 16v engine as long as there were at least 2 liter oil in the system (out of 5) and engine is not modded to rev past 7500 rpm. Pistons are also forged and Mercedes engine block is also high quality and rigid
Also when you measured compression you should do it right away the old school way*:
1. Measure compression write down value for single cylinder
2. Remove compression gauge, put through spark plug gap a few drops of engine oil in a single cylinder (not more!!! don-t pour oil and be careful)
3. Put gauge and measure again the same cylinder, compare readings to 1.
Result>
Difference up to 0,5 bar so piston rings are still very good and compression loss (if any) comes from valves not closing correctly
More than 0,5 bar piston rings are also either worn or with lots of carbon deposits on them (bad piston rings for sure)
* Trick comes from VW Beetle service manual from 60ties. Ever tried to repair hand bicycle pump yourself with a grease when rubber piston is worn? The same prinicple occurs here, that oil seals piston rings and for few engine turns sealing between piston and cylinder is perfect just enough to take measurement. Compression tester has non-returning valve so even if compression drops later on it will show max. value for which we care and which shows us what we need to know.
Also other method to trace blue smoke, that's when engine consumes oil is make someone drive behind you on open road and then accelerate with 2/3 throttle to 4000 or 5000 rpm and then quickly release throttle pedal for a second or two, and then depress pedal again to the floor. If there is a cloud of blue smoke that's the oil coming through valve guides/valve seals. If not they are OK. Also you can do it yourself by observing the rear view mirror when depressing pedal to the floor after it has been released but be very careful that way is more dangerous
If you look to some of 16v Hockenheim videos at YouTube there is to be seen exactly what I described above on car exiting sharp corner
Bad piston ringsIn case of bad piston rings (which could be a sticky oil ring as well, not necessarily worn out) the oil remains on the cylinder wall while the cylinder is firing. This means the oil is burnt as well as the air/fuel mixture during normal driving.
Bad valve sealsWhen decelerating at higher rpm you have a closed throttle which generates maximum vacuum in the cylinder. This vacuum sucks oil via leaking valve seals into the cylinder and as soon as you accelerate again this oil burns causing blue exhaust gases. The longer you "decelerate" = keep the throttle closed the worse it is.
Also remember white smoke comes from lean fuel (also clogged injector) or coolant entering cylinder, blue from oil and black from too much fuel (also leaking injector). Also different types of smoke smell differently one like rotten eggs, other like a 2T scooter or all together but better we leave smell alone
Conclusion> as one can do various tests when buying a car (compression, oil leaking in cylinder, compression loss test, endoscope, this test with deccelarating etc.) to be able to see what the real condition of the car is and not to overpay it, I think that you based on all what you said need to dismantle that engine anyway (first the cylinder head what can be done while engine still installed in car). Now if you do not plan to raise the power in future using serious but very expensive tuning and after results of repeated compression test (that with oil drops) shows that the rings are still good you may leave the bottom part alone and be happy with it. Also when cylinder head is off, and bottom in its place your mechanic will see what is condition of cylinder-wall by looking at top of it and to feel (or better measure) how much wear is there.
So now here is my advice:
If you like your 16v as it is, it is not your main car (it is a weekend, joyride car etc.) and you travel with it less then 5000km pro year (many of us not even 2000). If bottom don´t shows signs of major wear rebuild just the cylinder head and you will be happy with the result.
If you are up to tuning in future, even mild one, you must at least change rings and bearings now even if everything is still in specs. After more force is applied to used bearings they usually start to "sing" very soon. New pistons would be even better and of course they are must if current pistons / cylinders are out of specs.
Pistons are still to be found at Mercedes, but count on 1000 euros for them alone. Yes they come already with rings. Changing rings only will set you back from 100 to 300 euros set depending on where you find them and on discounts. Bearings for rods are about 30 euros a set. Decide now if you will go for tuning is it going to be even a turbo or compressor as for those applications you need different pistons which lower compression ratio and maybe some other parts and remember one the thing nobody wants is to do the same job twice or to have to buy the same expensive things like pistons twice in a short while.
Regards,
Shaq