I had my steering lock out yesterday trying to track down a vacuum shutoff problem. See this link for a list of related threads:
http://www.peachparts.com/shopforum/showthread.php?p=1065596
What I learned on my recent W123 is that the steering lock engages when the key is removed. When the key is re-inserted and turned, it must retract the heavy spring-loaded lock going into the steering column. This operation is allowed by the last few mm of the key that sticks through the cylinder and hits a small spring latch. It's clear how this can wear out.
I called three dealers and was quoted $170, $170 and $198 for the lock (without the cylinder). I think mine might go out soon (next 1-50,000 miles). I made one preemptive tweak to the steering lock before putting it back in with lots of lube. There is a small push-button release that can only be pressed with the key in the "radio" position. I ground this button off on my bench grinder in case the key gets stuck. This button locks into the sleeve in the steering column.
The steering column lock still works, but it removes one small layer of theft deterrent which probably meant more on a $30,000 wagon than a $500 wagon. If the key ever gets stuck, I can pop the whole steering lock out easily without drilling. I'll buy a new steering lock when the funds are available.
Hope this helps.
Rob