temp will go from hot to cold while driving or at idle . if the temp rheostat is manipulated ever so slightly , desired temp will be regained . Any ideas ?

Sounds like your rheostat is failing or dirty. Try some electrical contact cleaner and, if that doesn't work, replace the thumbwheel.

My S-class behaved exactly that way; turned out to be the little fan that drew cabin air over the in-cabin temp sensor. I think it's called a "sampling fan" ($50). On my S-class, the cabin temp sensor is behind a little grid in the roof console just above the mirror. A rubber tube routes all the way down to the right lower dash below the glove box, where the fan sits. It just sucks cabin air over the sensor to maintain proper temp readings.
The SL sensor is probably behind a little grid somewhere on the dash.
A quick check is to turn the ignition on and see if a light piece or tissue paper will adhere to the grid (suction), then fall off when the ignition is turned off.

DG

Thanks for the tip, mine will not hold a piece of toilet paper. I'm going to try it with some lighter tissue paper if I can find some.

http://www.peachparts.com/Wikka/W140AspiratorMotor

Found the link for the sampler replacement in a W140. In my 95 S350 there were 2 screws that had to be removed. They are right behind the light bulbs. You can't miss them. The screws are not listed in the tutorial.

-Jim

__________________
1995 S350D, Green with black leather interior.
Bought January 2008 w/ 233,xxx miles.
I did 22,000 miles during the first year of ownership.

Ok, I took everything apart and gave the fan a good cleaning. All I really had to do was blow all of the dust out of it.

I put it all back together and now it passes the toilet paper test!

I bet you could clean out the fan with a can of air, like the ones you use to clean keyboards. If you do that:
-Make sure the key is off so that the fan is not running.
-Put something like a needle or very small screw driver up into the fan to keep it from spinning. It will have to be long and thin to go the length of the sensor tube and down to the fan impeller.
-Once you do that, blow the begingles out of it without fear.

Man, I love this site.

Thanks,

-Jim

__________________
1995 S350D, Green with black leather interior.
Bought January 2008 w/ 233,xxx miles.
I did 22,000 miles during the first year of ownership.