This won't help with the flaring, and I'm probably wrong anyway, but:

When I got my '84 W123, it wouldn't shift in 4th either. The only way to make it shift into 4th was either accelerating very slowly, or letting go of the throttle and resuming once I was above 40mph or so, to make it shift up.

Reason? Bowden cable too tight. Loosened it up to where it has a tiny little bit of slack, and it shifts at much better points now and gave me 4th gear back without a problem.

I'm not a mechanic and I don't know much, but you could give it a try. The bowden cable is easily adjusted by hand. If it doesn't work, you can adjust it back to where it was, no harm done, but at the very least you can rule it out.

__________________
"The MB W123 is so bulletproof, you can drive them forever. Which is a good thing as it takes that long to get anywhere."
Betsie: 1984 W123 300D (hobby, 280k miles)
Myrla: 2001 Mazda Protege 2.0 ES 5spd (daily driver, 130k miles)
The Turd: 2007 Toyota Camry (wife's car, 118k miles)