Top engine hose E300 D 1996
 

The hose in the picture below keeps coming off from time to time. I can't associate this with anything. When it does the engine runs rough and smokes.

Both photos are really small; but, I beleive that is the vacuum hose that connects to your EGR valve directly beneath that side of your intake manifold.

The other end connects to a transducer mounted to the drivers side firewall.

That hose does not connect to the EGR valve on a 96; it connects to a plain fitting directly on the intake manifold. The other end, as TMAllison says, connects to a pressure transducer (010 542 99 17) on the firewall. If the hose comes off of the manifold (or is cracked), the transducer will sense zero vacuum, which is a false signal if the engine is running.

The hose is probably old and stretched. Why don't you just replace it?

the hose is very soft and flexible and I believe that it should stay on because of the vacuum, unless there is pressure that blows it away. Should I put a hose clamp to it?

Does it slide off very easily when you pull on it? If you say it's not worn then maybe you have some grease on the nipple or it's the wrong type of hose. If all else fails, I'd put a clamp on it.