Next time you're getting the smoke/exhaust/whatever coming up into the engine bay like that, crawl under the car and find out where it's coming from. It should be pretty obvious where the leak is because you should see the smoke/steam/whatever coming out where the breach is. The 126 has a flange connection sort of under the passenger foot area next to the transmission. There's a sort of "donut" seal in there and I had mine come loose and leak like crazy. Mine was due to misalignment when I reassembled the exhaust, tightening the bolts took care of it. I'd be looking for the exhaust leak, I can't stand the smell of exhaust in the cabin!

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Current stable:
1995 E320 149K (Nancy)
1983 500SL 120K (SLoL)

Black Sheep:
1985 524TD 167K (TotalDumpster™)

Gone but not forgotten:
1986 300SDL (RIP)
1991 350SD
1991 560SEL
1990 560SEL
1986 500SEL Euro (Rusted to nothing at 47K!)