Sounds like the guide rod mount on the body is dead. If original with 235kmi, it's definitely shot. Mine were not sloppy yet, or making noise, but they were very loose... could move shaft around with my pinky. The new ones required large tools to move at all! I also discovered there are internal grease boots, and mine were gone! The dry wax-like crud inside had been grease in a former life. Ditto the ball joints. Everything on a W123 front end can be replaced with the spring in place EXCEPT the lower control arm bushings.
I just rebuilt my W123 front end and replaced EVERY moving and rubber item in the suspension and steering, including both control arms/bushings, steering links & idler arm, ball joints and wheel bearings. Wow what an amazing difference in ride quality. Still nowhere near as nice as a 124 but much tighter than before. I also have new OE shocks (from Rusty, $75/pop).
Photos of the job are here:
http://www.meimann.com/images/mercedes/W123_suspension/
The upper bushings almost fell apart in my hands, they crumbled into dusty pieces. The lowers were intact but oblong, notice the photo in-car where the arm center sits below the center line of the bolt. Ball joints were also gone, steering links were not bad but were cheap insurance. Old steering shock was 100% dead. Cost was ~$400 for ALL new parts. The photo shows how to use the free AutoZone rental tool to press the new joints in, if you pull the dust boot off and insert the joint into the tool recess with no spacer ring. Not pretty but it works!
Regards,