Some people tell me I can use any kind of transmission fluid in my '93 300CE W124 and then I have others telling me I have to use only MB fluid; can anyone help me out on this?

You want Dexron II or III. You do not have the electronically controlled transmission which requires the MB fluid.

I actually asked for transmission fluid at my friendly local dealer, and they told me to go to a normal parts house. I asked what they sold through the service dept, since they used it for older customers' cars, but they said that they bought their Dexron by the drum.

Supposedly, Mobil 1 ATF works well in these, if you want to spend a bit more than what you would on normal Dexron. It's still a lot cheaper than MB fluid.