Having earlier replaced the fuel level sender in my 1983 300SD (on my web site) I still had some erratic operation when the indicator was in the 1/4 to Empty sector. The low fuel level warning light works fine.
I pulled the instrument cluster and cleaned the many (brown wire) ground connections disclosed. No difference. There was no significant corrosion noted on the connectors. Flicking the needle with a finger disclosed no resistance at any part of the needle's arc.
Well, thinking I would have to buy a new gauge on eBay or some such, I reckoned that there was nothing to lose from trying a spot of very light oil on the indicator shaft in the gauge, so I pulled the gauge (see my piece on repainting the needles on my site for how to do this) and applied just one drop of jeweller's oil to the shaft, letting it migrate down into the mechanism. The small oil container I have includes a fine needle for access to tight spots, and I did not want to remove the needle and risk damaging the gauge, so this worked well. So far it works fine.
Worth a try if all else fails.