I bought an '09 220 and performance wise, it was absolutely fine - probably better than I expected. Personally, I'm not interested in chipping any car and favour the American approach to performance. If it's not fast enough for you, buy one with a bigger engine where everything is engineered accordingly to accommodate the extra performance.
In the refinement stakes I thought the 220 left a lot to be desired - but this is after driving petrol V6's for many years. Downgrading to a diesel with only four pots was a mistake (for me anyway). I just couldn't get used to the 'rattling good diesel' noise at town speeds - although the 220 was fine on the open road.
I had a problem with the shifts on the 5G box in mine, which had been OK up to that point (apart from REALLY harsh and poor shifting when cold) but the issue was never really resolved by MB - so that was a good enough excuse to get shot of it as I hate cars that don't work properly.
My average mpg on the 220 was 32.08
I chopped the 220 for my present 280 - it's still only a diesel, but it's a much more pleasant and 'waftable' drive than the 220. Again, just my personal opinion but the E class needs 6 cylinders (or more) to feel like a luxury car. Performance is fair bit better too, but in the real world the 220 was fine in that department.
Other than an absolutely awful harsh change down from 2nd to 1st when the 7G box is cold, my experience is that the 7G is better than the 5G. Durability / reliability may be another story, but from from an auto shifting perspective, the 7G takes it in my view.
My average mpg with the 280 is currently 32.35 - actual brim to brim measurement, the computer is more optimistic.
The conventional wisdom is that the post face lift cars are much better, so as long as you are looking at a face lift 280 / 320 then I'd go with the 6 pot car every time. If the (relative) lack of refinement doesn't worry you, then a clean 220 would be a better option than a tatty pre-facelift 280 / 320. Bear in mind too that everything will be dearer with the V6 - insurance, servicing etc. In my book, it's definitely worth the extra but there are plenty of happy 220 owners on here.