The most important thing to note here is: don't delay or procrastinate in repairing this! You're playing russian roulette (er, should that be german roulette?) if you wait too long. You'll be stopped to fill up in the worst part of town at 2 AM, and the ignition will decide to not turn at all, and you'll be very sad that you waited to fix it.
Anyway, look at the "Key would not turn in ignition" thread in the Diesel Discussion forum.
'83 240D, 255k miles