UPDATE on transmission 86 300E
Thanks to everyone who replied.
I re-flushed the transmission and replaced the filter and gasket. I drained ALL of the fluid (from the pan and torque converter). There was a total of 5qt drained. (This may have been the problem afterall because I was checking my fluid with the engine cold...duh)
Anyway after replacing and draining everything. I put in 7qt of Dexron III fluid and it seems to run fine. I checked the fluid levels after driving the car around for 20min or so and it's between the 2 marks.
I hope the problem has been "cured", otherwise I think I'm going to have to rebuild or replace the transmission.
There was something that bothered me though when I bought the gasket for my 86' 300E, the sales person told me that my gasket was actually listed under the 190's. What was that all about? My gasket sort of looks like a figure "8" the "other" 300E gasket kind of tapers off. Did MB use the 190 transmission in the 1986 300E?
I spent $40 hoping to save $2000. I'll find out for sure this week if the shifting problem is gone.
Again, thanks to everyone for their advice.
1986 Gold 300E 4Dr automatic