There are so many good engines out there that you should have no problem finding a good runner for under $500. With luck you can hear one run in a junk car. The engine is usually not damaged in a crash. For example my friend is junking an 87 244 (200K miles) that got in a minor front end crash. A newer car would probably be fixed, but since the insurance says it's only worth so much, it becomes a parts car. It fires right up and sounds great. You can use the engine from any 85-up 240. The 89-up will be a direct replacement- the 85-88 cars would require that you change some of your engine sensors to your later style parts. Also the distributor from yours should be swapped to the older engine if you go that route.
Like I said, they're a dime-a-dozen, so if you wait for a good deal, you'll find one. Check out local Trader newspapers and look for deals like you'll find here: www.bargainnews.com
It doesn't sound like you are experiencing anything unusual- a lot of engines develop piston slap and some are worse than others. Interestingly enough the only other car I know of that had it's engine replaced for it was also a 1990. It did sound pretty bad, I admit, but it wasn't affecting the way the car drove in any way. Probably would run like that for another 100K or more.
Good luck!
--
Rob Bareiss, New London CT ::: 86 244DL, 87 244DL, 88 744GLE, 91 244: 808K total