It's one of two things - either the carb issue mentioned above, or an ignition issue. This assumes the motor is essentially healthy otherwise (good compression?).
That motor has two carburetors, essentially making it twin 2-cylinder motors connected by a common crankshaft. If one of the carbs isn't feeding it's related cylinders, those cylinders aren't getting the needed lubrication and piston scuffing is sure to follow. A quick and easy test is to start the motor, stuff a rag in each carb, one at a time. If the motor runs as is with the carb plugged, you've found the culprit. If the motor stalls, then it's the other carb.
It's a good idea to go through all of the systems on those old Mercs as an insurance policy. Most of the bits are inexpensive and you'll have peace of mind running a nearly 60 year old motor. Fuel pump kit, carb kits, water pump impeller, and a thoroughly cleaned magneto set up with proper timing and point dwell.
