vwbuge,

Yours sounds a bit low but not completely unreasonable. My '85 wagon does 18+/- in the city (but includes dragging itself up some major hills everyday) and about 23-24 highway. The SD is a bit heavier so that accounts for some of the difference. The California cars definitely don't get the mileage the federal cars do. My guess is if you did a complete check/adjustment of everything the highway numbers would improve a fair amount but the city improvement would be minor. There are a lot of variables from car to car and some just get lower mileage. That said, I'll bet you can improve the highway numbers a bit. Things to check besides what you've already done:

dragging brakes/sticking caliper(s)
injection timing
clean air filter
ALDA too rich

I'm sure others can add to this list.

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LRG
1987 300D Turbo 175K
2006 Toyota Prius, efficent but no soul
1985 300 TDT(130K miles of trouble free motoring)now sold

I keep a pretty close eye on the brakes. They aren't dragging. My air filter is clean. I even went as far as to flip the lid to allow more air. No difference except in dB......yuck, too loud. I adjusted the valves, cleaned the injectors, checked the air in the tires. Someone tried to blame it on my wheel tire combo but after a few math equations I say no way. The car starts and runs great. Smokes very little. Decent power and doesn't use any oil between changes. I have now installed a manual boost controller and have begun to fool with the alda. I still haven't turned it up.

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'85 300SD (formerly california emissions)
'08 Chevy Tahoe
'93 Ducati 900 SS
'79 Kawasaki KZ 650
'86 Kawasaki KX 250
'88 Kawasaki KDX200
'71 Hodaka Ace 100
'72 Triumph T100R