Thanks everyone for responding - it was the starter.
The dealer hit me for $640 to replace it!!! $240 for the part, $85 for a flatbed and and the rest in labor and taxes. This seems ridiculous for 2 bolts and an electical connector.
They told me they needed to modify the new starters because they do not fit precisely to the block of my '86 300E w/o the modification. This sounds extremely fishy. Any thoughts??
Pat, thanks for starting the string and the long distance diagnosis.