I have a 92 400E as well. If you have noticed your woring insulation is burnt, I would highly recommend replacing the harness. Your issues will only get worse if your harness is damaged as you described.
When I was suspicious of my harness, I called my local MB dealer and spoke with the service manager. He advised me that, depending upon the maintenance record of the vehicle and mileage, MB has been known to perform a "good will" or courtesy repair where MB pays all or part of the cost. It's an individual issue.
In my case, the harness was fine. I replaced by dist caps and rotors..HUGE improvement. I still have a slight rough idle every now and them. My shop did a detailed diagnostic and found that I have fuel injectors that are weak...ie..leak slighly under PSI..plus a fuel PSI regulator that is keeping fuel PSI in the fuel rail a bit too high.. one of those things that one tolerates until it becomes severe..unless you don't mind dropping a thousand or two to replace 8 injectors and a regulator.