Edit: This is on a 1985 300TD w123/123.
I wanted to add some input on this issue. My fuel gauge and temp gauge were both going crazy, bouncing when I turned on my headlights. If I put the car in neutral sometimes they would go back to accurate reading. When put back into gear (reverse or drive) they would bounce again. I thought I had a pinched wire due to the transmission being replaced. After searching this forum I found a ton of threads that lead to fairly simple solutions. I checked my battery ground, cleaned/sanded and reconnected. I checked my engine/chassis ground, cleaned and reconnected. I opened up my instrument cluster and was intimidated by the many wires coming out of the back. Someone in one of the posts on this suggested making a new ground rather than tracking down a bad one. I wanted to show people an easy way to do this. On the center back of the instrument housing the Oil Pressure, Tempurature and Fuel gauges there is a small threaded stud/nut sticking out about 1/4 inch or more. I attached a (green in pics) copper ground wire from this down 1 of the 2 grounding areas directly behind and below the instrument cluster. It's as simple as that. Use caution pushing out your cluster making sure wires/cables are free. There's also some insulation that simply folds over.
You could also check your ignition vacuum supply/shutoff hoses while your in there. Look up from directly under the backside of the key tumbler and see if the two hoses are swollen or wet. If so they'll eventually cause some problems with the car not shutting off...