I had a similar experiance with my 88 560SEL.

My car out of the blue started acting up on me just after I got it back from the shop (air intake issue left over from my 1st valve-job) and at first it started gimping out at stoplights when I was running an errand. When I shifted to neutral, everything was fine. When I returned from the store to my car it wouldn't start at first. I got it half-way home and it died in the middle of the intersection. Before it died it would miss and generally act as I would have expected if the transmission had jammed or if the fuel was bad.

On my car the problem was a dying ignition coil.

I don't know if it's a spark plug insulator as gerryvz suggested, but I would initially suspect the electrical ignition system.

The more I work on my 560SEL the more I love my 300CD. Maybe I should have gotten an SDL instead?

Good luck and the car is worth the effort! I love cruising 65mph at 2k rpm (with the redline sitting at 6k!)