yours in not the case of this sort and won't be the last- - so, the remediation, negotiation, settlement, legal action, penalties, slander, etc...all the paths have been crossed and no new ground will be forged here...educate yourself on all the possibilites and use this knowledge to wisely control the process
..knowing your rights and remedies (and especially how to get them enforced), knowing the applicable law, choosing a strategy that works, is all good and well but keep in mind that very little in life is clear cut (just recall trying to deal with your insurance company or someone else's insurance company on policy claims....like trying to pull a donkey on a 2" greased rope)
I'm sure you know, that the remedies available by law/range of damage awards (min.to max) are possible in the event a court of law rules in your favor- they are not automatic and may be appealed. A max penalty ruling may require irrefutable evidence of intentional and malicious fraud (in more than one instance, and over a substantive period of time). Needless to say, a spectacular bullet proof case is often needed for this outcome to occur. The entire legal proceeding, case scheduling, case prep-discovery process will probably be quite time consuming and $$$ consuming requiring experienced representation. As a side note, I'm sure you also are aware that this matter, as described, doesn't appear to be within a small claims jurisdiction -unless action is for the deficiency/ shortfall and shortfall is within small claims $$$ limits. As a general rule, once "legal action" is levied as an ultimatum (indicating an unwillingness to further negotiate), one pretty much has to go through with it, since - otherwise it's viewed as a false threat and affects your credibility in ongoing negotiations and achieving your goal.
Another thought, granted you are very close to the situation financially and emotionally, it may be wise to seek an "objective" third party opinion/ remediatioin on what would be considered a "fair" resolution(s)/ option(s) for all involved parties
Do you really think that it would appear reasonable that the dealership be required to pay for your personal use of the car over the past 11,500 miles (healthy use)?
It may appear more reasonable to request some $$$ consideration for the down time and personal time associated with warranty work and the whole scenario (outside the represented sale: similar model, mileage, and vintage MB).