Yes. As Paul S advises, you should replace the wire that's arcing. The arcing means that the spark that the ignition system is looking for from the coil in order to conduct combustion, is partially lost by grounding into the engine block. Hence, incomplete ignition and the misfiring you're experiencing. There may also be other things going on that contribute to your problem, but you can't begin to deal with those until the basics are taken care of.

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1988 California version 260E (W124)
Anthracite Grey/Palomino
Owned since new and still going strong and smooth
MBCA member

Past Mercedes-Benz:
1986 190E Baby Benz
1967 230 Inherited from mom when she downsized
1959 220S Introduced me to the joys of keepin' 'em goin'

There are only 10 kinds of people in the world--those who understand binary and those who don't