Often a wheel bearing noise will go away when you brake. Usually, a wheel bearing noise will also go away when you turn in one direction or another at speed.
If only braking stops the noise, I would suspect the pads.
I will presume you already know they are not simply worn out.
This is typically a sign that the pads are not completely releasing for whatever reason.
I know MB prescribes some sort of grease paste for the backs of the pads, but I use the typical parts store 'anti-squeal' paste, which is more like a rubbery adhesive than a grease.
I first discovered that this goo was affective when I had a similar (but worse) problem on my 450SE (12 years ago), and have used it on many various cars with good results ever since. I would rate this one as the remedy "most likely to succeed".
After cleaning up with sandpaper, I apply a very thin coating of heavy Moly grease ('brake grease') to the caliper surfaces that the pads slide on. Of course, the W124 pads do have those nice metal 'shims' to slide on, so they are much less prone to sticking in this way.
Also, while you have it apart, check the caliper pins. If they freeze up, you could get the problem described. If the rubber boots have failed, the pins could be dirty/worn/corroded/stuck. The boots and pins are a cheap replacement part. These actually tend to hold up very well on the W124, but I have seen this problem on other cars. After cleaning, I use a silicone grease on the pins.
Lastly (and worstly), the piston itself could be binding. Folks rarely repair these themselves anymore, since rebuilt calipers are relatively cheap.
Best of luck...
1986 300E 5-Speed 240k mi.