1987 240DL Wagon (Estate, 245, etc.) 167,xxx miles ..... I am the new, third owner.

I get this pungent burning odor (and it irritates my eyes as well) while running the heater, but ONLY if it is drawing fresh air in from the outside.
If the recirculate button is depressed the odor quickly dissipates, and all is well again.

The simple answer would be to keep it set to recirculate, however I am concerned about possibility of it being exhaust fumes entering the cabin.
Though, it has a new, fully welded exhaust system from head-pipe back, < 2 years old. Also, The blower motor was replaced < 1 year ago.
The previous owner (my best friend) says it never did that when his wife drove the car for many years.

My initial thought was that it could be some burning oil, etc. from inside the engine compartment, getting drawn into the intake, but I dunno?