In another nearby thread he said it's a '89 300 TE, but it certainly helps to state the year, model, and engine every time you start a thread.

From the description it sounds like the engine is afterfiring on overrun, which is usually caused by a mixture too lean to ignite in the cylinder, and then it ignites in the exhaust system causing one or more "pops". This should not occur since the KE system incorporates a fuel cutoff on deceleration, but there's about a 1-2 second delay before it occurs, and I can usually feel it.

Fuel cutoff is controlled by the microswitch on the linkage. The recommended adjustment results in a significant "dead spot" between microswitch activation and actual throttle valve movement.

On my 190E 2.6 five-speed it results in a low rate of rev drop upon upshifting that results in jerky shifts unless they are made slowly, especially 1-2 and 2-3 that have wide spacing. I adjusted the linkage to minimize the dead spot. This helped, but it's still an issue, and I expect that the idle speed control valve opens with throttle application and is slow to close upon lifting to shift, so revs still hang.

The OP needs to check that the microswitch is functioning, and then possibly adjust it. It's probably more difficult to "feel" the fuel cutoff on an automatic than a manual, but he should try to detect it. Probably the best way would be to lock the trans in second gear, then bring it to about 4000 and lift off. If fuel cutoff is functioning you should feel a very slight "jerk" followed by an increase in rate of deceleration after a second or two.

Upon subsequently applying throttle, the microswitch restarts fuel flow to the injectors prior to actual movement of the throttle valve for a smooth transition, but my adjustment to minimize the dead spot did not result in any issues when reapplying throttle.

Duke