What kind of Differential Oil am I suppose to use for a '87 560 SEL? The dealer want $64 for 2 bottles of there stuff. What is the type or equivalent for my car?

Sounds like Highway Robbery, $64 (It must be made of gold)
You can call Redline Oil or look them up on the net.
http://www.redlineoil.com/

I have been using their products for years. They probably
have a Dealer alternative.

No, what grade or spec not what brand

Do I use GL-4 or GL-5 differential oil and can I use synthetic in the '87 560 SEL?

75-90 Redline upc#57904
or GL-5 with addative

For all your lube needs on'81-2000 cars CHECKCHART
give all the specs.
http://www.chekchart.com/spec.htm#1

Any good grade of Hypoid gear oil (Mobil or Quaker State) in the rear end will be fine for most applications, unless you have some exotic gears back there, or you have limited slip which requires a special lube. Check owners manual or check with dealer. You can't go wrong with what MBZ recommends..

[Edited by jeffsr on 01-31-2001 at 08:34 PM]

My car has Limited Slip. I think most 560s do. I called the 1-800-For-Merc, went to dealer, and other parts stores for references. No one seems to know. That is why I am forced to buy $64 for 2 bottles.

Redline is for limited slip differentials. (see earlier post)
GL5 needs additive for limited slip differentials.
If you go to a speed shop they will fix you up. The one
by our raceway has what you need. Remember these folks
are used to dealing with limited slip differentials and posi-traction.:) :) :)