Tina,
I had the same problem on my 91 300D when I bought it. It would not shift out of 1st gear. Problem was with the governor located at the left rear of the trans behind a big round cover. The drive gear on the end of the governor was broken in half. Part was 2 bucks and change at the dealer. If you elect to check it out, first remove the rear trans mount to lower the trans then push it as far as possible to the passenger side of the car. This will give you just enough room to get to the governor. Remove the cover by removing the big wire ring and then the cover. You will see the governor weights. try to turn governor by hand. If it will turn, the gear is broker. There is a retainer ring that holds the gov in that you have to release to get the governor out. I can't remember if you spread it out or squeeze it in (can't remember, getting old) but do what ever it takes to pull the gov out and you should see the problem.
By the way, I only found half of the gear and assume the rest is still in the trans somewhere, but it hasn't caused any problems yet. It's been about 5 years now.

Good luck
Paul

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84 500 SEL (307,xxx miles)