Martin,
Talked to Marc at Sun Valley Mercedes Transmissions. When he realized that I am only sure I have lost 3rd gear lock up and all it does is slip, he thought that it was very likely that I have blown out the K1 seal on the inside of the K1 drum. That would make a certain amount of sense because K1 is first used for third gear. And the B-2 band used for third gear is also use in 2nd gear and second is fine, leaving the K1 first being used for third, which is not working.
"3rd Gear
In 3rd gear, brake band B-2 is applied and clutch K-1 is
engaged. Only the rear planetary gear set is involved in gear
reduction."
Unfortunately I would have to pull the tranny and open it up. They seem to think the seal could be replaced with standard shop tools and with a gasket overhaul kit. I am up for that. I could replace clutches and any seals and gaskets that get in the way on the trip to the K1 seal while I am in there, Any thoughts?
I am thinking I am going to drop the pan and check the K1 and B1 and maybe the K2 piston assemblies in the valve body since it is a quick check and no pulling the tranny, but it seems like the K1 seal is a good diagnosis.

__________________
Christopher Henkel
1990 190E 2.6 - Arctic white SOLD
1986 190E-16v - Blauswartze
1993 300CE - SOLD
2003 W208 CLK 320 Cabriolet - Magma Red