Don't. The 3.5L diesel is well known for its serious problems with its
connecting rods. Apparently they bend from fatigue; the piston then is
no longer square to its cylinder and the cylinder walls get scored. Some
failed early others ran for very many miles. This is serious $$ so avoid
these 3.5L diesels. At that time these models' designation alternated
between 350SD and 300SD; I believe both use the 3.5L engine.

A 300D or 300SDL ('86 & '87) is well regarded and performs well so long
as it's not overheated. Or, an older '78 to '85 300SD or '82 - '85 300D
in good condition with maintenance history, is another diesel
possibility - older, simple, tough and durable five cylinder diesel BUT
requires a bit more maintenance than the newer engines. I've owned an
'80 since new; it achieves 24 mpg in commute driving - diesels use
little fuel at idle - that's a good part of their economy - and then
rise to about 27 - 28 mpg on the freeway.

Alternatively, if the bulk of your use is freeway consider say an E320.
It has a six - 24 valve straight six thru '97, 18 valve V-6 thereafter.
On a trip my '97 E320 achieves up to 27 mpg and provides ample power -
much more power than my diesel.

Finally, if you want simple, fuel efficient, diesel, but smaller, a 240D
manual 4 speed or a 190D is a model to consider - and look for as not
many were sold. But don't expect performance with that economy.

Hope this helps you sort it out.