'97 E320 Shifting Late
 

My '97 E320 shifts late in lower gears when cold. Every morning it seems to hold on to 2nd and 3rd gear until I hit 3200 RPMs. After the first run through the gears, it shifts fine. Is this normal?

Yes, it will hold on to 2nd gear (not 3rd...) until 3100 RPMs or until your coolant level has reached 50 degrees C.

But I wouldn't recommend having to do that..... if I drive about 1/2 a mile it will usually shift out on it's own. I mean I try and avoid revving the engine that high when it's cold.
But I know it's not possible all the time.