I just found this thread or I would have chimed in earlier. The leak you describe is very common on the V8 W124's.
My 500E did the same thing and so do most, eventually. It's a small rubber hose that runs from the bottom of the P/S reservior to the top of the actual P/S pump, it's only about 3 in. long but difficult to remove without the pump out of the car.
Glad you fixed your leak!