The early W124 4-matics were popular here in the frozen north, and many owners I've talked to have found them quite disappointing from a cost of operation standpoint. The 4-matic system was very complex, and seems to require expensive repairs.
The "new" 4-matic system is simpler and uses the ASR/ESP instead of locking diffs. This is not as good for Jeep Jampboree kinda off-roading, but is less costly to manufacture, easier to maintain, and works very well in on-road conditions.
With the large volume of 4-matic systems on the road today (ML, W210) I would expect that we would have heard about any flaws in the new system by now. About 50% of E-Class cars sold in Canada are now 4-matics.
A friend of mine has an E430 4-matic, and it's been flawless so far. The only thing was the sticker (nearly $90K...)
1998 C230 "Black Betty"