You probably have one or more diodes out on the alternator (this is assuming the belt is tight!). This reduces output to as low at 4 amps, but the voltage will be fine. You could also have a failing voltage regulator -- its inside the alternator on this model.

Unfortunately, the lamp works by balancing the voltage from the battery with voltage from the alternator output and doesn't measure amperage. You get sufficient voltage, most of the time, to keep the lamp off or dim, but you are not charging the battery.

Get the charging system checked.

Peter

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1972 220D ?? miles
1988 300E 200,012
1987 300D Turbo killed 9/25/07, 275,000 miles
1985 Volvo 740 GLE Turobodiesel 218,000
1972 280 SE 4.5 165, 000 - It runs!