I find this discussion, limited as it is to automatic transmission equipped cars, a bit misleading.

I have a standard transmission in my 240D (it is my 3rd 240D, which were all preceded by a 1971 220D, also with a manual transmission-automatics should not be allowed within several hundred feet of one of those engines...). I have also driven many gasoline engine powered cars with manual transmissions, from VW's, to Fiats, Honda's, several 190E 2.3-16's, to our present 1988 300E with a five speed.

My experience, and my wife's experience differs from the generic conclusion reached in the prior posts.

The Diesel engines in the earlier incarnations (220D and 240D in the W114/115 chassis) had a flapper in the intake that closed off when the "idle" throttle position was reached. These cars had very peculiar feeling "coming off idle" performance as a result, and I believe this feature is controlled differently on the W123 240D as they are definitely different coming off idle, especially if the idle speed adjustment knob is turned up. I am not clear it exists on the 617 turbo engines at all.

Manual transmission equipped 220Ds, and 240Ds have pretty serious engine braking capacity, enough so that when you are driving on snow covered or icy roads, it it very ill advised to abruptly yank your foot off the throttle without first depressing the clutch.

I have personally spun these cars out coming down hills in challenging traction situations, and so has my wife. Just by taking my foot off the throttle. No need to touch the brakes. The rear wheels instantly came to their rolling speed at idle, which was less than the speed of the car and the front wheels, meaning the engine braking caused them to lose traction. And that was the beginning of a 360 degree approach to a stop sign in Girdwood, Alaska.

My wife was not so lucky in the 1982 240D, and backed into a guardrail (actually a cable supported by some rotten stumps that just broke off, so no real damage done). That same result couldn't be duplicated, and I tried in second instance noted, with one of the 190E's or in any other winter driving experiences I have had, which spans 4 decades.

I also think the net power of the Diesel engine in these cars at idle injection volumes and engine speeds other than idle speeds, is very low. At idle the freaking car won't even stay warmed up in really cold weather, and it is pretty easy to stall the engine unless the idle knob is turned up. Increasing speed, without increasing fuel flow will increase losses without a commensurate increase in engine output.

I think the braking "advantage" of the Diesel is a feature of its lower idle speed capability and is more apparent at lower speeds. At a trailing throttle, meaning just below the "maintain" speed/load position, the engine braking is not noticeably different than gas cars, which is good because it might otherwise make driving them smoothly a bigger chore.

I have no idea what the interface between the automatic and the throttle might be to make the automatic equipped versions have a weaker braking response. I used to figure it was the fact that there was a fluid connection for transmitting torque that might not be as efficient running "backwards" as it was running "forwards." But there may be other reasons too. All more motive to keep automatics away from my Diesels. Jim

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Own:
1986 Euro 190E 2.3-16 (291,000 miles),
1998 E300D TurboDiesel, 231,000 miles -purchased with 45,000,
1988 300E 5-speed 252,000 miles,
1983 240D 4-speed, purchased w/136,000, now with 222,000 miles.
2009 ML320CDI Bluetec, 89,000 miles

Owned:
1971 220D (250,000 miles plus, sold to father-in-law),
1975 240D (245,000 miles - died of body rot),
1991 350SD (176,560 miles, weakest Benz I have owned),
1999 C230 Sport (45,400 miles),
1982 240D (321,000 miles, put to sleep)