I just replaced the filter on a 88' 420sel a couple weeks ago, should be about the same as yours. Its located in a cluster with the fuel pump near the passenger-side rear wheel well, forward of the rear axle. You can't miss it. While you're there you should also inspect your rear differential for leaks.
Basically the whole cluster is held together by a series of clamps. I tried to loosen them to get at the filter but ultimately it was easier to simply remove them. I didn't have much trouble with spillage, but remember to open your gas tank cap before cracking the system open. That will remove the pressure from the fuel system and prevent gas from spraying all over. The filter itself holds about a liter of gas and its handy to have a small bucket or pan to drop the thing in and catch whatever drippage occurs.
If you are doing the job you might as well replace the fuel check valve as well, its only about $11 and you'll be right there anyway.
Best of luck!
1988 420SEL 170K