Suavechavo

I have a 96 C220. about 6 months ago the transmission would jerk back and forth while driving up hills. I checked the fluid level and it was low. Added fluid and it was fine. A week later, same thing. No leaks on the driveway or under car. So eventually it got worse and needed to be refilled almost every other day. Then one day I noticed on the highway some smoke being blown out behind me, but it wasnt all the time, it was only very occasionally. My mechanic, not to Benz familiar, changed the modulator but then it started to leak ATF and still blow smoke even more. A benz specialist had the car for 2 wks and cudnt make it smoke. Later i sent them a pic of it smoking and said that it was a blown head gasket, and Benz sys that due to the aluminum head, the gasket cudnt be replaced and i needed a new engine.
Question 1. They previously said that they compression tested the engine and it was normal, then they took it back and said that it was done when the engine was cold so that s why it passed.
Question 2. How cud the head gasket be blown if i never overheated the engine, cud it be caused by dirty coolant?
Question 3., If the cars head gasket is blown, wudnt it smoke all the time, it only does if u rev the engine really after about 10 mins.

Please help would be appreciated, cuz the car's in great condition other wise w/ about 145K miles.

Thanks