jeffsr, I disagree with your characterization of my conclusion as a "quantum leap" since that implies unsubstantiated guesswork instead of analysis.

My line of reasoning as to the most probable factors goes like this:

Either:
(a) the brake pads are dragging on the rotor, or
(b) the hub is moving and dragging the rotor on the pads.

Therefore:
(a) the calipers are not retracting fully, or
(b) the wheel bearings are degraded or out of adjustment.

In conclusion:
(a) the calipers need rebuilding or replacing, or
(b) the wheel bearings need tightening or replacement.

Research resources included:
(a) CD-ROM and paper service manuals for the 124
(b) internet i.e. http://autos.yahoo.com/repair/tree/0.5.html
(c) my brother, import mechanic and foreign car dealer
(d) Mercedes mailing lists and archives

Now, since I have never done this, I could have missed something, so any input will be greatly appreicated.

Jack
93 400e, 92k