Denis,
Right now the car is at a repair shop to have the cylinder drilled out and the lock assembly replaced. I should have it back on the next two days. In the meantime, I am driving a rented Dodge Intrepid, a real boat of a car. 
This is easily the most nightmarish problem I've had with my car, but at least it is being taken care of.
Considering how easy a preventive solution is, perhaps Mercedesshop should post a sticky on the main page (like the crankshaft balancer one) warning people to replace their cylinders at the first sign of jamming. I think it is that critical. Most failing systems in these cars give you months of advance warning, however this was very abrupt, failing about a week after I first noticed key stickiness.
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2008 E350 4matic / Black/Anthracite
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Gone but not Forgotten:
2001 E430 4matic, 206,xxx miles, Black/Charcoal
1995 E320, 252,xxx miles, Black/Grey
1989 260E, 223,00 miles, Black/Black
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