Robin,

I checked my 1992 300E, I have the drivers side under-dash panel removed and I can clearly see the cable that MrCjames mentioned in his post above, that cable goes from the gear selector to the right/bottom side of the ignition lock housing and it will not allow the key to be removed unless the gear selector is fully in Park.

When I tried to remove my ignition key while not in park, the engine did shut down but the key did not turn all the way to 0 position and I could not remove the key, only when I engage fully into Park did the key turn that little bit more and came out.

I think it's worth looking into this feature as a possible cause of your problem.

Acky