Originally posted by zero4588
what kind of test should be done to find out where the fault is?
Are you in the US? If so, you may have some recourse under the class-action lawsuit that MB lost with regards to engines in FSS equipped vehicles. Your 1998 E320 is so equipped, and I understand it is covered under the additional warranty coverage MB has put in place.
However, your consumption, while very high, may not be "out of spec" enough to warrant coverage. This is a bone of contention, as I understand that MB considers anything below 1000kms' per litre (about one quart per 600 miles) "normal."
That said, your consumption is at about that point. If that much were leaking, I should think it would be easy to find. If not a leak, you'll need to have the engine inspected for sludge build-up, which can cause damage to the top and bottom ends of the engine.