The A/C or the defrost must be ON in order for Recirc to remove moisture. If you recirculate the air without A/C or defrost on, it will increase moisture in the cabin.
But you're right -- your car should not do this. You have a water problem. And it doesn't take much moisture in the cabin of these cars to make them fog up. The reason is that they're built so well, they're practically air-tight. On my '92 201, the doors still shut hard unless I have a window cracked, or another door open. And if I turn the heater on Recirc without the A/C or defrost on, the windows will start to fog up in about 60 seconds. (Amazing for an 11 year old car with 144K miles)
I've never had a leak problem with my car, but a couple of the favorite causes for leaks in any car are:
1) Plugged drain hose/hole for the sun roof.
2) Plugged drain hose/hole for the A/C condenser.
If it were me, I'd check both of these.
'92 Mercedes 190E/2.3 (247K miles/my daily driver)
'93 Volvo 940 Turbo Wagon (263K miles/a family truckster with spunk)
'99 Kawasaki Concours
'85 Jeep CJ-7 w/ Fisher plow (226K miles)'93 Volvo 940 Turbo Wagon
'53 Willys-Overland Pickup
'85 Honda 750F Interceptor
'93 Nissan Quest
'89 Toyota Camry Wagon
'89 Dodge Raider
'81 Honda CB 750F Super Sport
'88 Toyota Celica
'95 Toyota Tacoma
'74 Honda CB 550F