I always used to check the oil cold, but now I am beginning to think it should be checked hot. I usually check it twice a week, and on long trips everytime I stop for gas (sometimes three times in one day and the engine is at operating temp). The reason I am thinking no longer checking the clod level is that my engine doesn't need oil when it isn't running. When it is hot, and there is oil through out the engine the level will be lower than when cold, but this is when the engine needs to have oil and it needs to have a certain level of oil (enough to cover the pump and make sure there is enough to keep it pumping continuously) even though there is oil circulating through the engine, not just in the pan. I'm not saying this is the way to do it for sure, but the manual says to check it hot and this might be the reason why. The manual says the difference between the min and max marks on my dipstick (420SEL) is two quarts. I had been filling it to the max (checked cold), and the car seemed to be using quite a bit of oil. I had to top it off with a quart every two weeks. Then I started checking it hot and making sure it was full half way between min and max hot, and the level has not gone down in over a month. I think I have found the perfect level. It does get a little higher when you check it cold as all the oil has dripped down, its just shy of the max mark when cold.
1995 E420 - retired
1986 420SEL - retired