I have an 85 Mercedes 300 diesel. It seems to accumulate a lot of air when the car is angled up hill and eventually stalls.

I've replaced filters, hoses, the primer pump, but to no avail. Then for the heck of it, I bypassed the lift pump, and the car runs flawlessly. Put it back to its original configuration, and it fails again.

Is it possible for a lift pump to leak air into the system? Or would it be something else wrong with it?

Yes it is entirely possible and has happened to others. You have answered your question by taking it out of the system and bypassing it. Good Luck.

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