I think Wolf is using a pickup and magnets attached to the driveshaft. You shouldn't have any trouble using the stock VSS though, I did it that way (it was pin 11 to my cruise amp, but I think your older car has a 10-pin connector. Check a wiring diagram to find the right one).
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'81 300TD Wagon 355k (Miss Diesel)
'83 300SD 180k
'84 500SEL 190k (Parting it out)
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