I have exactly the same symptoms. My cruise control was flawless before I replaced my heater core. I tried (and failed) to leave my steering wheel in place while I removed the dash. I bent the cruise control stalk in the process such that it wouldn't actuate the switch. I bent the stalk back, and the switch seemed to be OK, but within 10 minutes of using it the first time it starting acting up just as you've described. I've got a switch coming, I'll post my results. (FYI, I didn't go through the troubleshooting process yet, as I'm not comfortable with my old switch and wanted to replace it anyway. So that will be first, getting a good switch installed, then if it continues to act up I'll be more rigorous in my approach.)

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1987 W201 190D