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This sounds a lot like what I went through with my 300E (slash am still going through, but its almost done). Initially the problem with mine appeared to be the cap/rotor, which you can check by just taking off and inspecting. Mine had all kinds of carbon soot built up on the contacts of the cap, and the rotor's metal contact was corroded away. Replaced those and the car started up again.
However, there are some other things to take a look at too. OVP relay seems to be a problem sometimes (I actually have one for the later model cars that I'm not using, just acquired from a junkyard w/ 15pins), but also fuel pump relay. There is a bunch of information in a couple posts if you search for something like "300E no start" or "300E rough idle", such as resistances on different sensor you can measure.
If I had to do this all over again, I would start by checking for spark first, just pull a plug and crank the engine to see if you have spark, and if not, or if it is weak, then its an ignition issue.
My mechanic told me how to check the fuel and test for pressure at the same time by undoing the fuel line to the distributor and seeing if there is fuel, and then also checking the return line just after the valve to see if there is fuel. Apparently (and I may be wrong, Portuguese is not my first language, and English isn't my mechanic's first language lol) if there isn't any fuel in the return line then pressure is good. The only major components in the fuel system that can cause big problems are the fuel pump, distributor, and injectors (injector seals too I believe).
If I had to guess, I'd say your problems lies somewhere in the electrical system, because the semi-mechanical fuel injection on the m103's (you do have a 103, right?) doesn't really fail.
Hope this helps, and do a quick search for the no start and the rough idle.
John
edit: what ended up fixing my car was the CPS at the bell housing, a new EZL box, and new plugs (after the OVP, Fuel Pump Relay, Cap/Rotor, and misc other tweaks)
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87 300E
202k on the clock
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