I don't know how to diagnose it... but I believe Mike is correct in the RPM sensor not causing cycling.
My understanding is this (which could easily be wrong):
If the sensor indicates the compressor is not turning (i.e. it's locked up for some reason), then the A/C clutch is released to allow the A/C pulley to spin freely to prevent damage to the belt. The system does not attempt to re-engage the clutch until it is reset by switching the ignition off and on.
Re: the used part, I'm trying to get the first dealer that misdiagnosed it to compensate me for my expenses, and he may want me to send him the old part. If not, you're welcome to it for the cost of postage. I'll let you know.
1999 E320 Wagon