Oh yea, those big Mercs can be had for chips! Bargain prices!
UK spec 560 117.0xx engine is 299bhp but more importantly about 340ft/lb of torque. The 420 has 240bhp. There was never a manual box for a W126 v8 though, which could be a problem if you were that way inclined. A Supra box and adaptor plate may be up to it though!
The earlier 3.5 and 4.5 V8s are worth avoiding as they've got cast iron bottom ends and as such weigh a frigging ton
It's better to start off with a later ally block as found in the 380 / 420 / 500 / 560.
Tuning parts are few and far between though unfortunately - Shrick do make cams, as do Renntech but they cost an arm and a leg so it's mostly down to getting nonstandard air filters, custom headers (although I think someone did make those) and fettling your own fueling/ignition/ECU system to get the most out of it. They respond quite well to turbocharging as well.....Koenig used to do a supercharger kit for them, might still do?
I'm sure there's a few places in Germany that can get you bits for them but I think it'd be a hard fight getting things off the shelf like ARP bits, new bearings and so on - or avoiding the cost of main dealer prices.
Still - very good lumps though!