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The engine in the 500E and E500 were not built by Porsche. They were Mercedes 5.0L V-8s from the SL and S500 modified to fit into the W124's more constricted engine bay. Porsche helped Mercedes by using their facility to construct the autos, and doing some of the design mods to accomodate the bigger engine and beefier suspension.
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Some correct information regarding who built what:
Each 500E started life at the Rossle-Bau plant where the basic body shell was completed, including doors, trunk, and hood, and then transported on special trucks to the Mercedes Sindelfingen plant across town. There, the body was corrosion-proofed and painted, giving it the full measure of rust protection and allowing customers to choose from the entire palette of Mercedes colors. Then each 500E went back to the Porsche plant for more assembly. Engines, transmissions, and other major mechanicals were assembled by Mercedes and shipped to Porsche for installation. Then another trip across town, back to Mercedes, where each 500E received a final inspection before delivery or export. On average, it took 18 days to build each 500E, much of which was consumed by transportation time.
Porsche's modifications to the original 300E included splaying-out and reinforcing the frame rails, widening the driveshaft tunnel, modifying the front axle crossmember and other engine bay components to accept the 5-liter 326-hp V8 engine that was also specified for the 500SL at that time and weighed 32 kg more than the 300E's inline-6 engine. The heavy duty battery was moved to the trunk to achieve an ideal 50:50 weight balance with two occupants and 80 kg of luggage aboard. 500SL-sourced wishbone suspension pieces and steering linkages were reinforced to accomodate the 500E's increased weight. The 500E stands nearly 2.5 cm lower than the 300E due to shorter and stiffer springs with plastic buffers and gas pressurized shock absorbers with internal damping springs. A hydraulic self-leveling suspension is standard equipment. 11.8-inch vented disc brakes in the front were sourced from the 300CE, and the 10.9-inch vented rear discs were the same as the 500SL. Wider wheels and tires resulted in a 37 mm wider track at the front and 38 mm at the back. The wheel well fenders were flared out to better accomodate the extra width.
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