Here's a very good step-by-step explanation from Benzworld.
I can't really comment on how accurate it is because I have never done it, however other members have said it was great. Good luck!

The new timing chain, upper chain rails and tensioner are finally in the 1989 420sel with 98Kmi. This report summarizes some thoughts that might be useful to a first-time DIY'er.
A. This job took at least twice as long as I thought it would, and that didn't include time studying the manual and other sources. If you are in a hurry or do not enjoy the work, this may not be a job for for a DIY'er.
B. Information--Search the List archives for useful information. Especially useful threads were "timing chain and rail replacement questions for a 117 engine" (Nov. 28-30, 2004) and "420sel timing chain" (October 29-30, 2003). I also bought an illustrated booklet ("preventing catastrophic V-8 engine failure") from **************.com (no connection) and this explained most of what the manual does not. There are photos of the "3 vice-grip method" of chain replacement at Mercedesshop.com ("M116/117 timing chain replacement"). Also, the recent book "Mercedes Benz Technical Companion" has several useful articles on timing chains and chain replacement.
C. The manual is essential reading of course, but I found several possible discrepancies. First, the camshaft sprockets should (must?) be removed to replace the upper chain rails. Second, it appears possible to wind in a new chain without removing the right side rockers. I did remove them, as recommended, to eliminate the problems of the right cam possibly jumping time. Third, I used a bit less than the manual's 25nm of torque on the 8mm bolts that attach various parts to the heads. The 1991 Technical Data Manual seems to indicate 21nm of torque for most of these. Also, I left the old tensioner partially inserted in the right head (held with a long 8mm bolt and nut arrangement) while winding in the new chain, so most of the slack on that side of the chain would be taken up.
D. Unanticipated problems--the 4 left-side chain rail pins were more or less rusted inside. A 6mm bottom tap cleaned them up. All 6 pins came out relatively easily after soaking in Kroil. I also "chilled" them with Radio Shack component cooler, and that might have helped. I bought 4 new pins. An old pin is the perfect drift for replacing the pins recessed in the heads. One of the cap screws holding the alternator mount on the right head was corroded and I bought a new one. The distributor retaining bolt was hard to get out. That bolt goes down through a 2-inch long spacer under the distributor and you need to get the Kroil down in there. Remember to counter-hold the fuel line fittings at the fuel distributor when disconnecting the fuel lines. Be prepared for a minor fuel spill. Relieving the gas tank pressure at the gas cap may alleviate this.
E. Other jobs--While the front of the engine is clear, it is easy to replace the thermostat, the radiator hoses and the voltage regulator. (Mine were original and due for replacement.) Also, with the top radiator hose off, the fan shroud can come out making it a little easier to work on the front of the engine.
F. Parts--I used genuine Mercedes parts (chain, rails, tensioner, oil tube kits, valve cover gaskets and bolt washers). There are reports of aftermarket rails (and chains) failing relatively quickly. The new chain came with the "fish head" clip on the connecting link favored by Stu. (The clip must be installed so that the "head" points in the direction of chain travel.) I replaced the tension rail lining (available from MB as a separate part) and re-used the tension rail itself. I did not replace the cam sprockets, which looked fine.
G. Tools--Nothing truly exotic is required. A special valve spring compressor if the rockers are to be removed, a good 6mm hex bit socket, and a tool for pulling the chain rail pins. For the latter I ordered online a few long, fully-threaded 8.8 strength 6mm bolts, nuts and fender washers from the Bolt Depot (again, no connection), and used them with various sockets, large nuts, shim washers, etc. to replicate the official pin puller tool. The websites of Assenmacher, Zdmak, etc. illustrate the factory tools.
H. Although there may be some short-cuts, my order of battle was as follows (refer to the manual and/or the ************** booklet for the job procedure details):
1. Disconnect battery. Remove air cleaner. Remove fan together with visco fan clutch (store in upright position), leaving 1 bolt in the fan pulley. I used a strap wrench on the pulley hub to keep it from turning. A long 10mm box wrench is helpful.
2. Unbolt the cruise control actuator and put to one side. Remove alternator and then alternator mount from right head.
3. Remove spark plug wires from plugs. Remove distributor cap together with plug wires. Set engine to TDC. On the engine, mark orientation of the distributor mark/rotor so the distributor can be replaced in the same position. Remove distributor.
4, Unbolt P/S pump and tie off to the side (the hoses remain connected). Unbolt P/S pump mounting plate from left head.
5. Disconnect fuel lines at fuel distributor and tie up out of the way. Remove valve covers. Gently pry off oil tubes and clean any plastic bits out of the cam bearing towers with picks and tweezers. If you are going to remove the right side rockers, now is a good time.
6. Check 3 upper chain rails for damage. Assuming no broken rails, pull all 6 chain rail pins 1/4 of the way out (about 3/8 of an inch). if you are going to have a problem with these, now is the time to know.
7. Slightly loosen both cam sprocket bolts. Reset engine to TDC and confirm/evaluate camshaft timing.
8. Mark and remove left camshaft sprocket, keeping tension on the chain (I used 2 bungee cords with hooks suspended from the garage overhead). Pull pins and fit new left side chain rails, one at a time. Refit left sprocket, observing marks, and the bolt.
9. Remove old chain tensioner. Mark and remove right camshaft sprocket, keeping tension on the chain. Pull the 2 rail pins and remove the old right side chain rail. Remove tension rail, replace lining, and refit the tension rail. Fit new right side chain rail. Replace right side cam sprocket, observing marks, and the bolt. (I deferred retorquing the cam sprocket bolts in case the timing needed to be adjusted after the new chain is in.) Reconfirm camshaft timing.
10. Wind in the new chain using the 3 vice-grip method or, with an assistant, using the method in the manual. It is easier if the spark plugs are out, but I would remove them only if new plugs are going in.
11. Fit new chain tensioner. Double check camshaft timing. Torque cam sprocket bolts to 100nm.
12. Put everything back together in reverse order. Use new oil tube kits and valve cover gaskets. Remember to set the distributor timing precisely according to the manual (before installing valve covers to make TDC identification easy). Do oil and filter change.
The main thing is to work patiently and carefully, and always use shop rags, etc. to prevent anything from falling into the engine. Be especially careful with the timing chains, as it would be a disaster if a chain fell into the engine.
All in all, the job was challenging and fun (and successful), but time-consuming as constant vigilance is necessary to avoid an expensive mistake.
At 98Kmi and 15 years, the old chain and rails were in OK shape (right cam retarded about 5 degrees), and didn't yet make noise on start-up. They probably would have gone a few more years. The plastic oiler tube clips were very brittle and definitely needed to be renewed.
I hope this report is of some help to other W126 DIY'ers. Thanks to Stu, Bob and others for their helpful advice. Charlie Wagner, 1989 420sel 98Kmi.