Merc hands down. My mother owned a '98 S500 and before buying it I helped her shop around and we drove a handful of 740i's, one being that ltd edition with the light cream interior and funky blue metallic paint work.
The Merc seemed heavier, but was deceptively fast -- the word that comes to mind is "authoritative". I hate to say this, but the 740 seemed boring to drive --- a real yawn-fest. Not the case with the 5's or 3's, but it just didn't excite me too much. All of this is purely subjective of course.
I think there's a few members on this board who own or have owned both cars, so will be interesting to see if they chime in!
If it was an older W140, I'd say the cost to own would be more than the BMW. The later years are more reliable.