Water in tranny at any time is not good at all, if it has been there for a long time, the damage is done already. If the oil was never changed during the lifetime, in this case it is 20 years, it is a severe case of neglect, wonder what else in this vehicle has been neglected. Goes to show how sturdy, well made the old MB vehicles used to be. The water could be a result of accumulation of condensation over the years and the other likely culprit for water getting into these particular trannies is the shifter link seals. Over years, they deteriorate and don't seal well letting oil out and other stuff like water, dirt in.

I change the oil in my tranny at 10,000Km and when I do some heavy off roading in water logged areas, I change my oil even more frequently. I also re-grease my wheel hub bearings. I have been extremely satisfied with Mobil-I ATF as well as gear lube and have used this in all vehicles including my Accord.

If your gears arent grinding or suspicious noise is coming out of your tranny, change it to a cheap ATF, drive it for a day or so and flush it out. This way, all the filth accumulated would cleaned up hopefuly and then change to Mobil-I ATF and use Mobil-I gear lube in your differential. Make sure you flush your differential using the same procedure, except use gear lube in this case.