Hey Dean,
Yeah I personally think going with a rear mounted turbo is the best option for the 500E. The under hood temps are high enough much less the available space unless your willing to give up your ABS and washer bottle. The only negative of this system is that you will experience some lag due to the length of piping the exhaust and intake supply. You will also loose some pressure but no big deal.

The turbo lubrication system would also have to be separate from the engine and you'd need a scavenge pump to lift the oil. Kinda like a mini dry sump. The system should easily fit into the well on the left side of the trunk conveniently located right under the original muffler housing. I think it would be a great project, maybe one day I can afford to give it a try.

Adam

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Current Stable:
01 ML55 AMG
92 500E (a few mods)
87 300E (lots of mods)
00 Chevy 3500HD Diesel Box Truck
68 18' Donzi Marine
06 GT i-Drive7 1.0 Mountain Bike (with GPS!)

PREVIOUSLY OWNED:83 300SD, 87 420SEL, 88 420SEL, 90 420SEL, 86 560SEL, 86 190E 2.3-16V AMG, 94 E320