Hello
I have a Merc 230E w124 1988. It has been suffering from some of the cold/low throttle misfiring that many other owners have apparently shared. I have decided to make a start on remedying the problem as a very novice mechanic. My first step was new plugs and air filter which didn’t work, and I have moved onto replacing distributor cap, rotor arm and leads – all of which are original and fairly worn.
My first hiccup came when I ordered a replacement set of leads and found that the ignition coil lead had a female connection to the coil instead of the male on my original. I think I have found the correct lead through a local dealer and as I destroyed the original on removal I will just have to keep trying until I can get a correct replacement somewhere.
On removing the rotor arm I dislodged a plastic cover/seal leading to the distributor base. Under this seal seemed to be a very badly worn o-ring that fell apart in my hand. I also noticed that there was a small quantity of reddish oil in a recess at the base of the distributor. As the recess seemed to be part of the design I wonder whether the oil is meant to be there or is it a symptom of some other problem.
So these are my two main questions – i. What exactly was that steel o-ring that had decayed? and ii. What exactly was that oil?
Any help would be very much appreciated.

Russ