Thanks guys - yes it is a E320 cabriolet W124 model - it is one of the very last that was built - it was sold in the UK as late as spring 1997.

Just to clarify the 17mpg is based on highway driving - not city driving so it is low. The car has been serviced and all fluids changed including the auto box fluid. The spark plugs have been changed and the old ones were a nice light brown color - seemed to be just right.

The thing that is puzzling me is if the o2 sensor is faulty then the plugs would be black?