Where's your warranty booklet? Read it carefully. In my Canadian version, the emissions parts are listed, each and every one of them. The MAS is on the list, and is covered for eight years/130K from the delivery date, regardless of the warranty in place.
Also, your car originally came with a four year 50K-mile bumper-bumper warranty. If the dealer is claiming the original warranty is only two years, they're VERY wrong.
It sounds like you might need to either find another dealer, or call MBUSA (1-800-for-merc) to get more information.
One of my local dealers told me that if I did my own oil changes, it voided my warranty. BS! One call to MB Canada, and that information was clarified. The dealer backpedaled a little bit, but they were BUSTED.
And if you do end up paying for the part, check out fastlane on this site. Might have a better price. installing it yourself isn't all that hard, and I'm sure Gilly or some other tech could walk you through it easily.
1998 C230 "Black Betty"