Thanks Jeff, Marty, Sixto and others for the advice and help. I dropped the car off at my trusted indie today, tomorrow I will be getting the call. I'll post the diagnosis.

The pressure test is warming the car up and then leaving it sitting overnight. If the cooling system holds pressure 12-24 hours, it is likely from a cracked head or internally leaking head gasket. It should slowly release pressure as it cools. My car passes this test, as well as the other quickie tests like looking for coolant in the oil, oil in the coolant, and white smoke. All good there. I'm keeping my fingers crossed it only an external leak.

And the gauge is reading correctly as verified by my IR thermometer, and the water pump was replaced six months ago by PO and still looks new.

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1972 280SE 4.5
1984 300SD, 250K
1991 300SE, 89K
1992 300D (330K miles when KIA'd by mother-in-law 8/10/09 - still sitting in my barn)
1994 E320, 109K
1995 E420, 60K
Proud Member of the Mercedes Benz Club of America - Idaho Chapter