Went to dealer. Coolant Temp Sensor bad. $189 diag, parts and labor. Original estimates (I did have to go back once) $270.
Why did I have to go back? Really it's a good story which is why I am posting. The terminals to the sensor were badly corroded and initially this was thought to be the problem. Tech cleaned and reinstalled and tested. Light did not come back on so this was thought to have fixed it. Although I had to go back, I am very happy to have recieved dealer service where they did not 'throw parts at it' the first time, and took the most logical and inexpensive route. No labor was charged the second time.
1986 300E Anthracite + ECodes + MB Mileage Award