Thanks to all who commented!
I looked at the car today. Cosmetically, you cannot tell whether it has 20K or 120K on it. The only sign of wear is on the driver's seat on the left. I could not find a leak anywhere, everything works, and it has a perfect maintenance book. It did not seem to have any of the problems that Ross detailed.
I did see dealer receipts in 2000 for a rebuilt transmission ($2600), and several rear suspension components ($4000).
Drove it. Steering seemed uncertain while going straight ahead, but car seemed very solid otherwise. I put the pedal to the metal with the selector in "B" and it was quick, but not the nail-you-to-the-seat I was expecting.
I am a little suspicious about the history. Supposedly, Garage de France in Bath NY lost its MB franchise, and the owner did not want to keep the car without local factory service. So he traded it on an Audi. The Audi dealer then wholesaled it and it ended up on a lot in PA, where the current owner bought it. He is selling it because he has had a hip replacement and cannot drive the car for more than a half-hour without pain because the seats are not wide enough.
I am having a hard time believing that a car this clean would be wholesaled. I am suspicious that it was sold after obviously loving care and a $6600 recent investment. I am also concerned about the uncertain steering. My 300E with 189K seems more stable as I drove home.
This was the first 500E that I have gotten up close and personal with - what magnificent cars! I just don't want to be the one left holding the bag.