It's normal to feel the 722.6 tranny downshifting, but not abruptly. Search JCE's posts, as he has a 1998 C230 with all sorts of tranny woes, including the problem you mentioned.
A friend of mine with a 98 C280 had such violent downshifts that it nearly locked up the rear wheels! The dealer simply installed a new transmission, and the problem was solved.
With your car under warranty, there should be NO charge for diagnostic time if the problem is with a warranty component.
I wonder is the torque converter lock-up is malfunctioning? Anyone got any ideas of why this would happen?
1998 C230 "Black Betty"