td, I've got 164k miles on my 95 E320 and have never gotten below 20mpg with it, no matter how hard I drive (which is pretty hard). I usually get close to 30 on the highway regardless of temp. or whether the A/C is on or not. So I would say you most certainly have something wrong.
Do you know how to run the codes with the built in LED? I think Paul may be on to something when he mentions fuel pressure, and if it's too high then a code should be stored. That's the first thing I would recommend before you go tearing into anything or even getting gas on your hands, let the car tell you what's wrong with it.
You didn't mention how it runs, is it running "normally" i.e. smooth and without drama or is it hard to start and running rough?