Is your W123 an station wagon or a sedan fitted with the optional rear self-levilling suspension?
If your answer is yes to any of the two options, your problem is a little more complicated than you may think.
It seems that your rear shock absorber is leaking hydraulic fluid from the self-levelling rear suspension system.
For starters, the shock itself cannot be fixed, once is leaking its gone. A new shock is quite expensive, and before going into the trouble of fitting a new one, BE SURE TO HAVE TO WHOLE SYSTEM THROROUGHLY CHECKED BY A PROFFESIONAL!
In a '81 300TD I owned for 18 years the authorized dealer installed four shocks, which all failed after just 2 or 3 days, before giving a real check to the hydraulic system (their stupid mistake, not mine).
In my case, a distribuition valve (located near the rear axle, square-shapped), which splits the oil pressure that comes from the pump (located at the front and engine driven by a belt from the accessory loop) failed, and started pumping to much pressure into the rear left shock, which subsequently ruptured the gaskets.
Sometimes the oil pump at the engine compartment, as I understand, fails often also. The over-flow oil reservoirs (a ballon-shapped black object placed at near the shock absorbers) also tend to fail, and in my case, they where also changed with the distribution valve (all items, due the high pressures that the system manages, are also quite expensive).
Also, because of the aformentioned high pressures in oil pressure that the system manages, it is highly recommended NOT to do any D.I.Y. on the system. Not even changing the shock absorber.
As a final adjustment, the shop manager adjusted the load sensor on the system so it would start working at a higher weight than the one specified by the factory. Since I did not usually used to carry anything heavy, this extended a little the life expectancy of the system (something I think the new owner will appreciate).
Hope this was somehow useful.
S 320, 1998
E 320 T, 1995
[Edited by A. Rosich on 05-11-2001 at 09:49 PM]