Although not from a MB source, I have been told that the two sizes were due to limitations in the european market. This comes by way of a Chrysler source when he was trying to explain why the Chrysler 300M had such an abbreviated rear end. Same thing for Cadillac's Seville. Both cars needed to be shorter in order to sell in the european market.
MB knows however that long wheelbase vehicles are needed/demanded by overseas (read: US) buyers, so both were made. This is not uncommon as many european marques maintain this short wheelbase (SWB) vs. long wheelbase (LWB) practice:
Rolls Royce: Silver Seraph (SWB), Park Ward (LWB)
Jaguar: XJ8 (SWB), XJ8L and Vanden Plas (LWB)
BMW: 740i (SWB), 740iL and 750iL (LWB)
As a matter of fact, Lincoln also adopted this "long wheelbase" idea in the 2000 MY with the Lincon Town Car Cartier L. It has a chassis six inches longer than a standard Town Car. Of course, this takes the car from just long to longest-US-production-car status. As with the european cars, the Lincoln is not a "stretched car", it is purpose built with the longer wheelbase (as opposed to having been created by aftermarket conversion companies where the car is actally cut in half and then reassembled with the added length).
Along with length in europe, there is also a stiff penalty for cars with large engines. In order to keep up performance with a small engine, they made the bodies smaller. For example, the car Lady Di was in when she met her untimely demise was an S280 (!). For the US market, the smallest "S" class powerplant is the 6 cylinder 3.2 liter engine. On a recent trip to London, I saw a BMW 719 (that's 1.9 liters! compare to the US 740/750 - 4.0 and 5.0 liters!!) .
Hope this helps.
Oops, didn't mean to be verbose.....