I am having a very similar problem with my 87 300e. Whenever the car is warmed up and at a stoplight or sign, it dives way down. Once it actually died on me. The problem is coupled with a problem in acceleration when the car has just started. If I try to push it any more than a fraction, the whole thing backs off in jolts as if I'm trying to kill it. My first thoughts were a fuel filter or possibly transmission. How would the o2 contribute to this problem?