I have a 1997 E300D. Unfortunately those vehicles did not have a turbo. I notice this lack of power more just outside of Denver (approx 6900 ft) than I do on the east coast.
I bought my E300D in Colorado Springs and have gotten quite used to it's slow manners in this high altitude - my '78 300SD puts it to shame...
When I drove it to New Jersey, I suddenly had power that I had never seen before - I was even able to squeal the wheels - a first.
Upon my return to Denver, I put a K&N filter in the E300D. I love the K&N filter in this car because it turns a painful accelerator into a car that is adequate. I have also experienced a 2-3mpg increase in both local, highway and mixed driving. That will certainly pay for the filter.
Unfortunately now that it has more power, my wife drives it 75% of the time. I would not run anything else by K&N in this vehicle.
Now on the other hand, I put a K&N in my '78 300SD and have noticed little or no change.