I've never had a situation like this before, so I need expert advice. I have an '83 300SD Turbo that has started leaking massive amounts of oil around the oil pan gasket. Has about 450K miles on it (guess). Took it to a master mechanic (yes, trained in Germany) and he said that I had rings that were going bad. Pressure leaking around the piston and forcing oil out through the gasket. Repair would cost $1200 labor plus the cost of a rebuilt engine.
I have spent a lot of money on the car. AC works, new battery, all new performance rotors and pads, relatively new radiator, new PS pump, relatively new tires, relatively new water pump, etc.
Here is the question, what should I do with the car? Should I try to sell it as a hobby fixer upper, should I sell for scrap, should I part it out (don't really have a place to store it), do people take cars on commission for parting-out or just donate it for a tax deduction?

I understand condition of the car is important in your response. So if you can give me "do this if it is in good cond., do this if it is in ..."
Thanks.