I wonder if it's possible that the pump shaft sheered. I can't say I'm familiar with Merc transmissions, yet.

Lacking proper diagnotictools like a pressure gauge, and assuming the fluid is full, I'd start by cracking a transmission cooler line and see if fluid spurts out when the motor turns. If it does, maybe some seal croaked, somewhere, or something in the valve body got hung up.

Someone here must be well versed in the workings of your tranny. Hopefully they show up soon!

__________________
- K.C.Adams

'77 300D Euro Delivery
OM617 turbo / 4-speed swap
404 Milanbraun Metallic / 134 Dattel MB-Tex

Current status:
* Undergoing body work

My '77 300D progress thread