Though I could be wrong but it sounds like the vacuum accuators behind the dash have gone out or at least one of them. In my 1988 190e, which I believe is similar in construction to your 300 when this happened, I had to change one of the acuators. Since this requires removing the dash, I changed all three located behind the dash. The parts are inexpensive but the labor is going to kill you!
But before ripping the dash apart, you should check or have checked ( do not remember the name) the cnetral vacuum thing-a-jig which is located (in my car) behind the glove box.
If you do a search on climate control or AC, you will come up with many threads that talk about this in detail. (also, haev chacked teh climate control box - this could also be your problem)
These model and year cars are notorious for this problem/repair.
Insanity: doing the same thing over and over again and expecting different results.
2006 - Suzuki Gran Vitara (2.0 L fully equipped) Like this car so far except for trying to put on the seatbelt.
1988 - 190e - 2.3L - 172K miles (It now belongs to the exwife)
1999 - Chevy Blazer LS Fully Equiped - killed it June 2006
2001 - Honda Civic EX - 68K miles (sold June 2004)
1963 - 220S - Dual Carb 6 cyl. (sold)
1994 - Yamaha WaveRaider (fun to ride)