I had this problem with my 87 300TD.
There are three parts to the "ignition" switch:
1. Lock barrel. This is the part the key fits
2. Flat connecting rod. This part joins part #1 with part #3.
3. Electrical switch. This part contains the contacts and a rotary arm that moves in concert with part #1, via part #2.
On my car, part #2 failed. It twisted, and did not allow the rotary arm in part #3 to make contact with the starter terminal.
For simplicity, I'm disregarding the steering column lock mechanism.....
Jim