I have a 1996 E300D and the stock stereo has been replaced. Now we are having security issues which I think might be related to the stereo. Every so often after locking the car or leaving it for some time we get the security lights under the mirror to flash and then the car will not start. We have to get out lock/unlock the car, sometimes several times before the car will act normal and start. Is there a removal sensor for this year and if so where is it located? Any help would be much appreciated.

Do you mean alternating green and red lamps, or do they flash simultaneously?

Simultaneous flashing means that your remote batteries are weak.

I suspect the alternating flashing, since you say that the car will not start. Alternating lamps on the mirror indicate DAS failure, i.e., you are not considered authorized to start the engine. Probably the most common cause is the K40 relay module, although the ignition switch itself or one of the computers could be at fault.