I understand there are two problems that can come up:
1. The key itself is not functioning properly, and replacing the key will solve the problem.
2. The EIS is malfunctioning, and the ignition switch will have to be replaced.
On my 1998 C230, the key would be recognized, then start the car, then the car would die immediately. It did it with all keys, seemingly at random. A new EIS solved the problem.
If your problems occur with only one key (try switching keys if you use one more than the other) then the key itself is probably the culprit. Otherwise, look to the EIS.
Talking to W203 owners, all seem to have key problems.
1998 C230 "Black Betty"