I would dig further into specifically where they say the water pump is leaking. I hate to say this about dealers, but they tend to take a shotgun approach when it comes to coolant leaks, especially if the service manager thinks you are not a DIYer and he can get away with it.

My neighbor was a diehard Mercedes owner until he took his 300E to the dealer for a coolant leak. They replaced the entire cooling system (radiator, hoses, water pump, belt, thermostat) for $1,800 and they didn't even tell him they were going to do all the work. I guess they just presumed that because he was in his sixties and was well dressed, they could charge him the max (his wife was wearing some expensive looking jewelry too).

He was so mad when he picked up the car that he drove it from the Mercedes dealer directly to the Lexus dealer and traded it in towards an LS400. Every two years, he buys a new LS 4xx. It was Mercedes' loss.

See if they can put it on the rack and show you where the leak is coming from. To the extent they cannot (or will not) show you, I would think about taking it for a second opinion.

If you decide to drive it off, make sure the warning light for the coolant level is working (observe the light comes on with the others when you turn the key). Assuming you have at least the minimum coolant and the temperature is within normal limits, I don't see how this could hurt the engine. Just be prepared to pull over and turn the engine off if the low level light comes on and/or the temperature starts to get over 110 degrees. If you let it overheat, you could warp the heads and that would cost more than the car is worth.

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1993 400E, 256,000 miles (totaled)
1994 E420, 200,000+ miles
1995 E420, 201,000 miles