Sorry to reply so late and thanks all for the suggestions. Calling all parts stores everyone said (including MB dealer) they could not get the OEM Bosch O2 sensor for weeks on end as the factory was out. Consulted independent mechanic (MB Master) about possibility of O2 sensor and he said "wellllll..." Took a gamble and bought a Bosch "Universal" O2 sensor which according to Bosch is the same sensor as the MB OEM with a universal connector. Approx $100. Fairly simple job of splicing connectors together (included!). Had to use vice grips to get the old sensor out, plus make sure to let the car run so the exhaust is hot. (This was the key) In order to get the new connector to fit, you must do the electrical connections under the rug first, and then push the O2 sensor through the hole in the trans tunnel, or else the connector will not fit. (Trial & error in the rain) It turns out this solved the problem, and on a recent trip the car averaged about 24 MPG, including a few city miles. The smell is also gone. Actually, when running the car to get the exhaust hot for the original O2 sensor removal, the sensor was unplugged and the car actually ran better with NO O2 sensor than with the original! So its fine again...and the "universal" Bosch is about $50 cheaper. I did think of the wiring harness, and the insulation on the wires which go to the thermostat are cracking a little.... I think its possible either the Check Eng. light bulb is out or someone unplugged it to pass inspection, because it has not worked since our purchase of the car @ 39,000 miles. The car has always run perfectly, though, even with the bad O2 sensor. Thanks all, again.

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2002 Mercedes-Benz E320 4Matic
1995 Mercedes-Benz E320 Wagon
2005 Land Rover LR3 V8 SE
1999 Audi A8 4.2L quattro