What's your mileage? Also have you tried the hand push test? With your car parked, go around the back and push down really hard with your hands on each corner of the rear. If the car bounces up and down several times before stopping you probably need new rear shocks. I'm pretty sure these Mercedes shocks are supposed to last around 150,000 miles or more, so if your mileage is around here that's what you could be looking at. I don't know prices, but if that is all it is, I can't imagine you are looking at more than $100 or so per side plus labor. Check the parts shop for prices. I think your model has self-leveling anf beefed up rear suspension compared to other w126 models. There may be other problems which could get expensive, but it may just be the shocks. Have it looked at. I don't think driving with the car like that will damage the car, but it will seriously affect your handling, and you may get into an accident you could otherwise have avoided. It's definitely worth doing.