Jen-
I have that problem on my 240D and looks like I have it on my "new" W116 300SD. MBZ did a great job of undercoating the underside of the floor pan with a very durable rubberized coating. On the inside, they did a good job of noise proofing the cabin with some sort of spongy asphalt-like material. Sandwiched in between these two is your steel floor. The undercoating originally did a good job of protecting the underside of the steel from water splashing up from below. But when water gets past the undercoating through cracks, the water sits against the steel and rusts. Similarly, when water gets in the cabin from leaky windshields, etc, it gets into the spongy asphalt sound deadening material and rots the steel.
On my W123, even though both surfaces looked OK from the outside, when I pushed down on the floor I could hear a "crunch" like corn flakes in there. I peeled back the inside asphalt and found a hole about the size of my fist below the clutch pedal. I also found two more much smaller holes further back at the back of the front seat where the floor pan is welded to the rocker panel. After I ground all the rust away to white metal ,I patched the bigger hole with steel using a two-part epoxy metal bond that is used in the trade to glue on quarter panels. The repair has held up just fine for over a year. You may have to do something like this. You may also get someone to weld in new metal, or use fiberglass if the hole isn't too big.
But the most important thing is, you need to peel back any compromised undercoating or sound deadening material and see how extensive the problem is to determine the cause and corrective action.
Rick
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80 300SD (129k mi) 82 240D stick (193k mi)77 240D auto - stick to be (153k mi) 85 380SL (145k mi) 89 BMW 535i 82 Diesel Rabbit Pickup (374k mi) 91 Jetta IDI Diesel (155k mi) 81 VW Rabbit Convertible Diesel 70 Triumph Spitfire Mk III (63kmi)66 Triumph TR4a IRS (90k mi)67 Ford F-100 (??)
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