Generally I think that W123's handle well but are hampered by body roll and isolated steering. Body roll and non communicative steering don't inspire confidence during aggressive driving. Before I got my '82 300D Turbo I had a '87 Jetta GL (blue/blue) which had little body roll and lots of steering feel.

It's odd that W123's aren't better handling cars since they have many revised and carry over parts from the much better handling W116 like the front suspension. You'd figure they would make the larger more expensive W116 the luxo cruiser and make the smaller, cheaper W123 a better handler.