For older cars, like a W123, you can just get a copy at a good locksmith - IF you have a non-worn original for them to copy! I just got some done for my W123, they were $3 each. My "originals" from the PO were just copies, and they were worn. I ordered one master from the dealer and had copies of that made for $3. The dealer wanted ~$25 each! Ouch. One note: The OEM keys are steel. The copies are brass. Ever notice a little pile of shavings under your ignition lock? If so, you probably are using a copy, not a steel original!
For newer cars, W201, W124, W126, etc they are laser-cut like Peter said. Some very competent locksmiths can make copies of these, however they will be brass copies, not steel - same as above. And, in this case, the OEM keys are CHEAPER than the brass copies! The dealer wanted $17/each, the only locksmith in town that could do it wants $25/each! That's a no-brainer... 25% less for a steel VIN-cut original key!
Oh - about the cheesy top piece - yep, that's they way they come. You can dissasemble the key and look at it. It's a "flat" key with the plastic head snapped in place over it. I don't like it either but we don't have much choice, now do we? Only the older keys are like this, the laser-cut keys have a nice solid head.
Regards,