The E320 has 4-piston calipers, unlike the early w124's with front floating calipers. The clips are in place with the wires to the wear sensors tucked underneath.

Yep everything it in the proper place, and nothing was removed other than the caliper.

It is definitely a rotor rubbing against something. I wish I had a go-pro now!

I'm going to try pads next and see. Can you see my confusion?!