As a follow-up to the log and arduous saga of my engine rebuild and associated trouble, I wanted to post a note regarding the block heater fiasco.
My block heater (v3.0) works fine now. But only after an extreme chemical flushing of the block water jacket. This is the first time I have ever heard of a process of water jacket flushing, but I now know that it is a procedure that could be of help to anyone experiencing problems with block and engine temperature issues.
First of all, NEVER use radiator "quick fixes" like "Stop Leak" and other panaceas that address symptoms but not causes. I cannot imagine a Mercedes-Benz owner resorting to such measures, but apparently one did with my car, in its earlier life. What "Stop Leak" does is fill your radiator and engine block with, among other undesirable things, is copper. The copper purportedly fills the hole and stops the leak in the radiator that should have been replaced instead. Problem is, on diesel Benzes, the copper also attaches itself to the elements of the block heater. And shorts it out.
An additional benefit of the extensive and thorough flush administered to my engine is that it runs about 7-10 degrees cooler. Apparently, and any foreign crap introduced (such as "Stop Leak") into the cooling system, collects as gunk in the bottom of the engine block and reduces cooling circulation volume, and interferes with block heater, etc.
Liver and Learn!
Thanks to all who responded during this entire ordeal.