Hello everyone....Here's the update...
Thanks for all your inputs... You guys are the best. I know your answers were correct but this is what MB stated..
It was the front flex disc that failed that caused the airbag to deploy. It's nice to know that it worked on a 19 yr old Benz.
I'm bringing to my mechanic tomorrow, and they're replacing everything at no cost.
I still feel the safest driving in this car, than all my other 15 cars I've owned thru the years.;)

MB is picking up the tab? That is simply amazing on a car that old! Sometimes MB can really stand behind their products!

NO MB is NOT picking up the tab... I'm bring back to my indie to get fixed...

Wait a min, then how is it free???

Did Mercedes-Benz contract them some how?

Or is you indie the greatest person in the world?

Either it's a defective flex disc, which is under warranty or the mechanic installed it backwards. Which cause the air bag to deploy and seat belts to lock up, and a scare to my life.. MB had nothing to do with this arrangement.

This was a pretty frightening story. I wonder if the disks fail from age alone or a combination of age and driveshaft imbalance/center bearing wear or failure. This may be a part that I'm going to call the Classic Center on, get the right P/N's, and order from the dealer and pay the price. I'm under the impression that at least some models of 107's have different front/rear disks, and I don't think I'd trust the dealer to get this right.

I did read in the MB manual that there is labelling on the disk (in German) as to which direction goes towards the front. When I replace mine, I'm going to examine this labelling very, very carefully...

I think that your mechanic doesn't want to be sued for the "pain and agony" or "psychological damage" you may have experienced. I think a little Post Traumatic Stress is worth getting a brand new airbag and a great story to tell.

Accident reconstruction
 

In Germany (for Mercedes) and Sweden (for Volvos) they have teams of factory accident investigators who go out on serious calls to check out how "structurally challinging" accidents affect the cars. this is to help them improve them in in the future, and to see how what was in place performed.
The investigators always explain they are at the scene to investigate the car not their occupants, and privacy is strictly maintained, so they can sometimes get a more complete story.

It is stressed they have "nothing" to do with the police, so therefore no self serving stories are told. (Driver of a high speed C class told the Police he fell asleep, but told the MB investigator the truth, he had been drinking)

There was an interesting story about these programs in Car and Driver I think, some years ago, but it doesn't exist in the USA if I recall correctly

Strife wrote In my experience, it is age and miles that causes the failure of flex discs. MB has numerous different versions of flex discs and the "radially soft" or "push-pull" flex discs (likely what was on cangold's 124) seem to be more failure prone than the solid discs. The upside is that it's pretty easy to determine by observation when they should be replaced. Mark

The front flex disc is one of those things you should just change every 10-15 years, like brake lines. But then again it isn't unheard of for a pretty new one to go bad and fall.

The air bag sensor is right over the flex disc, so if the driveshaft comes lose it will knock that sensor extremly hard.

That is what I was thinking. I would imagine that an airbag replacement for that car would be rather costly.

Yeah, I was surprised to see it too. I had heard about the 73' Impalas having the airbags (only 1000 of them), but had never personally saw one before, except one in an old "Allstate" insurance ad in an old Time magazine that I had. Out of only 1000 with the option, I would say this is probably one of the last remaining with the option. Oddly, in different Allstate ads from the early 70s, some showed the airbags in early 1970s Mercury Montereys and Marquis', but not sure how many of those were equipped.

Many more (but still rare) of 74-76 Oldsmobile, Buick and Cadillac with the airbag option still remain, since 10,000 were equipped with the option, but even 10,000 is a low number for a car made so many years ago. You do not see many with the option these days.
As mentioned, my grandmother had a 74' Oldsmobile Toronado with the dual airbag option and I came very close to purchasing a 20K actual mile, 74' Buick Electra 225 4dr with the option as well about 2 years ago. An interesting side note- the tilt wheel option was not available on the airbag equipped models. Obviously, the technology was not up to par back then to have both together. :)

I saw the old flex disc which was only replaced 4 months ago and my mechanic did install correctly, German wording towards the driveshaft...He stated has replaced 30 +worn disc and never has seen this happen before.
My driveshaft was also not loose, so it was a defective bilstein flex disc.
Lots of pieces all over the place.

I also feel it seems strange to have an airbag sensor right over a flex disc.

I will have to check my flex discs... Yesterday my wife was driving and we heard a loud pop and a burst of air hit her in the chest. We pulled over and looked, but found nothing. My wife asked me to drive as she was shaken up. When she tried to put her seatbelt on it was completely locked up. We decided to carry on to our destination and then take a closer look. Five minutes later as we were driving down the road the airbag went off without any reason whatsoever. It exploded in my face. We were able to park safely and noone was seriously injured. I do have a very bruised arm and the windshield is completely broken. The interior of the car had air blown all through it and did some damage (nothing that can't be fixed). It definitely felt like a freak accident. I am glad that this forum is here. At least now I can look at the car and figure out if that was the cause. Thanks for the info!

So do the seat belts lock permanatly after an airbag deployment??