It could be a defective EGR valve, or could be indicating low EGR flow.
A common problem with these M104 engines is that the hot inlet pipe to the intake manifold gets clogged up from the EGR vapors.
Steve Brotherton mentions this in an article posted on this site.
Click on D.I.Y. at the top of the screen, and click on the link for Evaluating Diagnostic Engine Controls to read about the problem and the solution.
2001 E430, Bourdeaux Red, Oyster interior.
1973 280SE 4.5, 170,000 miles. 568 Signal Red, Black MB Tex. "The Red Baron".