Good news, and bad news. After installing a "Rebuilt" Bosh AL66X, the lights went away. I can drive and throttle the engine and no odd light behavior. GREAT NEWS!!

Bad news is that after 10 minutes of driving the Alternator started screeeeeeeeching with any load. i could hear the bearings chewing itself up and i even saw metal flakes fly out of it when at idle. So i have solved the odd light issue but i will take the Alternator back out and swap it for another "Rebuilt"... Sigh. Not too bad though, so great news still. Thanks to everyone for helping to troubleshoot.

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Grey '91 350SDL 214k Dad's car
Beige '81 240D 4 Speed 254k SOLD
Blue '82 300D 225k SOLD
White '95 E300D 46k SOLD
Blue '87 190D 2.5 Turbo 315k SOLD
Brown '80 240D 4 Speed 716k SOLD
Beige '80 300D N/A 119k SOLD
Blue '85 300D Model 186k T-Boned

Did you ever measure the AC voltage on the bad alternator? It'd be interesting to know whether some of the internal diodes has failed which would produce a small AC voltage.

It's amazing reading about the poor quality of some of these rebuilt alternators. I have never bought a rebuilt in all my years of driving. I just replace the parts that wear which are the brushes and the 2 bearings.

On your next alternator, ask the store to bench test it before you install it. Any problems with bearings or charging hopefully will be caught before you put more work into it.

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85 300D turbo pristine w 157k when purchased 161K now
83 300 D turbo 297K runs great. SOLD!
83 240D 4 spd manual- parted out then junked