The 3.8L V-8 is weak. The 300SD diesel is more desirable if you want a short wheelbase (SD or SE) and if you want the big V-8 you have to get the long wheelbase.
That said, while it's slow and shockingly thirsty for a smaller engine, the W126 is a nice car no matter what engine you find if you find a great example. Personally, I would search only for late 560SEL. They're the best of the best W126.