First: Has the m/c and/or brake booster been replaced? If so, you may have a mechanical problem rather than a hydraulic one. Perhaps there is excess clearance in the linkage from the booster which activates the m/c?
Second: I had a similar problem with my 1987 300TDT, though it occurred *after* a brake service & bleeding.
I had used a homebuilt pressure bleeder to flush out the old fluid. Said bleeder used pressurized air to move fluid from the reservior, through the m/c, and out to the calipers. Despite the use of several liters of brake fluid, more than a few curse words, and a ritual sacrifice to Stuttgart, I could not get a firm pedal. The brakes didn't even really work.
So I threw the darn thing away and did it the old fashined way. I attached a rubber tube to the bleeder nipple of the chosen caliper and placed said tube in a jar of brake fluid. Opened nipple and proceeded to pump away on the brake pedal. There were two odd results of this technique: 1) It didn't draw in fluid from the jar when releasing the pedal; it all came from the reservoir 2) It worked perfectly.
Turns out the bleeder was forcing tiny air bubbles into the fluid, which were then drawn into the m/c and throughout the system.
If you give this old technique a try, be careful not to empty the reservoir. It only takes about 5 pedal pumps to completely empty the reservoir for the rear brakes. Be sure to wait a few seconds between pumps for fluid to flow from the reservoir to the m/c.
Some poster's will likely express concern about using the pump-the-pedal method because it occasionally ruins the seals in the m/c. While this is a legitimate concern, it seems you don't have much to lose.