Thanks for all the excellent feedback!
I think that the solutions are as follows;
1) change the oil more frequently than it's 3,000 mile routine. Interesting as MB suggest 7,500 mile changes for this car.
2) go to a better grade of oil - will try Pennzoil Long Life 15w -50 oil for diesel/gas engines instead of the Pennzoil ?? weight the dealer uses.
3) not worry about the sudden oil loss as my car's sump is somewhat funnel shaped and this accounts for why Mr. Wizard was talking about my car only last week
4) I would have the valvestem seals replaced but this was done about 30K miles ago and reduced the oil consumption from almost 9 quarts (!) in 7,500 miles to only 1 quart in 2,000 miles.
Remaining queries are: Do I want to go with a 5w-- xx oil for the cold weather season to reduce wear? Or maybe get that '99 e320 4-matic wagon I saw instead...