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S'2000,
someone posted sometime back that this started in '92 as a result of switching to a different insulation material for the wires which unfortunately does not stand up well to heat and time. the sheath itself is not at issue although in your case you would probably do well to replace it if it is crumbling. i think one would use a heat resistant wrap for this purpose. i do not know how it is in your 300CE but the harness runs all over the engine, that's why it is a time consuming though not difficult job.
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