the locking mechanism failed because of a broken shaft. You will have to replace the whole locking mechanism on the tailgate. It costs about $70 but 1-2 hours of labor charge. my 98 ml failed a year or so ago. Same thing as you described. can lock manually from inside and unlock with remote, but cannot lock by remote or the console lock button. I still have the parts, if you want to see what it looks like, email me and I can send you a pic and show u what was failed.
I will blame this on MB with a poor design. the shaft is made out of plastic and it is bound to fail at some point due to material fatigue. The other problem is that the shaft pushes the latch to unlock and pulls to lock. When the shaft breaks, it can only perform the unlocking function.