Try pointing the remote at one of the other lock receivers. It's possibly the one you're testing with is bad. Stevebfl's instructions are accurate, because I have used that exact procedure to re-sync the key on my '97 S320.

If it still doesn't work, then I'd say you either have a problem with the transmitter diode in the key or there's a problem with the car's security module.

You can test the key by aiming it a digital camera and pressing the button. The CCD in modern digital cameras can detect the infra-red beam emitted by the key. So if you watch the viewfinder while pressing the button, you will see the LED flicker with a kind of white/purple color.

I'm not sure about how to test the car's module though. I imagine the Star Diagnostic system would probably have a way to do that.

__________________
"It's not about how fast you can go, but how well you can go fast."

Bob in Richmond

'97 S320 (LWB), Ruby Red Metallic, 73k miles
'97 S420V, Smoke Silver Metallic, 155k miles