Well, it's certainly "possible" to get 28 MPG on a car the size/weight/aerodynamics of a 126. My buddy got an actual 28 on his Honda
Odyssey minivan on a 500 mile highway trip once. But, the kicker was, he never drove faster than 60 MPH. And of course, that's a modern DFI computerized engine, with a HIGH OVERDRIVE TRANNY.

Re; the big engine vs small engine question: GM engineers discovered that excellent big-V8 economy can be obtained with the engine in the highest gear possible, turning the lowest rpm possible, with the throttle open wide; just above the point of lugging. This reduces the huge "pumping" losses to overcome the high vacuum in the engine associated with higher rpm and less throttle opening. Obviously, zero intake vacuum results in less pumping loss (theoretically). Also, internal friction and inertia is reduced at these lower RPM's.

So, if you had a big V8 doing 1500 at 75 MPH, and a V6 doing 2200 at 75mph, both at pretty high throttle openings and low vacuum, the V8 might come close, but could never overcome the additional internal friction and inertia; all other things being equal.

Unfortunately, MB never geared the 126 cars for economy. They are all geared for good response and performance, not low-rpm cruising.
They don't even have an overdrive. The 500 SEL would need a differential ratio of less than 1.90 to even get in the MPG ballgame. Imagine trying to launch a 4500 pound 126 in 2nd gear with that differential!

DG