According to the service manual (applies to my 350SE, which originally had a set up like yours I believe), the antenna is supposed to extend 30 CM (about 1 ft), then you adjust from there with the switch. That was somebody's bright idea back in the '80's at MB I guess, and perhaps was useful with the old Beckers in Europe. Who knows.
I re-wired to bypass the switch (or at least so it acts like it's always pressed for full up). Your problem is probably resolvable, but unless you're trying to restore the audio to pristine orginal, why bother? If you have an original Hirschmann antenna, there's a circuit board inside that works with the switch to accomplish this stupid feat. These are no longer available, and very rare, but again, WTF would anyone pay over $100.00 to get the antenna to do this?
When my friend and I did the re-wiring, we just pulled the switch out and with me in the trunk and him in the car, found the right combination to send the power directly to the antenna so it would go all up when the radio was on, and down when off. I have the circuit diagram and could maybe figure out how to do this if I had time, but I don't.
Just pull out the switch, unplug the connector, and remove the connector cover. Then move the wires inside, one at a time, with the radio on/off until you find the combo that works. At worse, you might blow a fuse, but I doubt it if you're careful not to ground any wire external to the plug, or jump them inside it.

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1986 560SL
2002 Toyota Camry
1993 Lexus