Thank you for the relies & help.
The plot thickens. It still gets really hot with the new Mercedes thermostat.
When I turn the heat on, suddenly the thermostat opens, everything circulates, the radiator gets hot & the temp drops to 88ºC.
I turn the heat off & within minutes the thermostat closes, the radiator cools & it runs really hot again. The thermostat stays closed until I turn the heat back on.
What the heck??
BTW, it still has the original fan clutch that is stuck engaged so it pulls a ton-o-air.

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85 300SD. 88 300SE. 85 560SL.