Wow. Finally I come across someone else with the same problem I have. My 89 190E 2.0 does the same thing. I have two options; let go of the key, and the car will immediately die, or I can just hold the key through the temporary "start" and let it continue cranking (~4sec until the car actually starts). I have the problem only when the engine is warm. When completely cold, like in the morning, it starts on the first revolution and _stays_ started. Much like Steve, I am suspecting vapor lock because of lost fuel pressure. But before I go ahead and yank the fuel system apart, I'd love to hear if anyone else has had the same problem and successfully fixed it. Steve, if you find the solution, please let me know.
Jason
jason@scirocco.org