I would guess a sticking valve or leaking check ball, possibly a leaking servo, but that's not likely.

The reason it works properly when you shift to neutral first is that you dump all the control pressure off the shift valves when you take it out of gear, and I'd bet it's hanging on the downshift to first.

Auto trannies work by applying hydraulic pressure to either clutch packs made up of disks coated with friction material interleaved with steel plates or by servos clamping a band on a drum. MB uses two or three bands (for the three planetary sets) and three clutches -- the bands clamp around the ring gear "bucket" and the clutch packs are splined inside and out -- one side for the frictions, the other for the steels. In modern practice, there are also several "overrunning clutches" (also known as sprag clutches) that only allow free rotation in one direction. Much lighter that a clutch pack, and no hydraulics needed.

Pressure is applied to the correct band servos or clutch pistons by a "mechanical computer" consisting of spool valves and springs. The spool valves open and close hydraulic passages as they move back and forth under the influence of springs and hydraulic pressure (or the shifter linkage). If the spool valves are dirty, they will stick, so the correct pressures aren't applied.

The check balls serve to "cushion" the pressure changes so the tranny doesn't slam the clutches or servos on -- Torqueflites were well known for snapping the low/reverse band actuator end off if downshifted manually at high speed -- police cars had the first gear position blocked to prevent this. When the tranny gets worn and the pistons in the servos and clutches have to move a long way to engage, the tranny "flares" between gears since it is in netural with no clutches engaged. Some will shift VERY hard under these conditions if something is allowe dto turn backwards momentarily.

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1972 220D ?? miles
1988 300E 200,012
1987 300D Turbo killed 9/25/07, 275,000 miles
1985 Volvo 740 GLE Turobodiesel 218,000
1972 280 SE 4.5 165, 000 - It runs!