I had a similar problem with my M103 in my 300CE. It would hesitate at times, especially when cold. I too could feel a noticeable flat spot in the acceleration curve. I had recently done the head gasket and top end. All six injectors and seals were replaced as well as the fuel accumulator. Turns out that it was a defective fuel pressure regulator. The hesitation is gone and it starts without any problems now. By the way, I too have used mid and high grade fuels and have found that there is almost no difference in engine performance between the two.