Speaking from experience, a rusty import W126 is something to steer well clear of... if there is visible rust, you don't want to know what lurks beneath the trim and rear window.
I can only assume that the trans has failed due to the B2 piston failing or the trans cooler being perforated. If the piston has failed, it's an "easy" fix, if the latter, it probably needs a complete rebuild like my 380SE does. Coolant and transmissions don't mix.
Tim