What's the (physical) difference between a valet key and regular key?
 

The valet key works in the ign but not the trunk where the regular key works in both. I looked at mine, which are well worn brass copies and they look like they are cut the same and I can't see any difference. One key works only in the ign and the other in both. So what's the difference?

The master key should have a more squarish rubber handle on the top while the valet key will be roundish.

The owner's manual has a picture describing the difference. It's pretty obvious if you compare the two side by side.

The master key will unlock the glove box and the trunk. The valet key won't let you do that. That's really the only difference between the two.

You should get the steel copies made. I'm pretty sure using a brass copy leaves shavings in the ignition cylinder which can cause it to lock up.

the center groove is slightly off center from the master key.

And therefore, I am guessing that the protrusions on the key are not hitting the tumblers the same and not pushing them as far.

So I can make any key a master key by putting a square handle on it? :D Sorry, couldn't resist.

Yes, exactly. And if you take the lettering from a 300SD and put it on your trunk, you can turn your 300D into an S class. :)

Larger grooves as well.