Gentlemen, Thanks for all the advice. We have finally solved the problem.

The flywheel (ring gear) was indeed installed in the wrong position. When I purchased the car, the car was not running. I had asked the previous owner if the transmission had been removed and he said it had not. Now we know he had a memory lapse.
We wanted to eliminate everything we could before we pulled the transmission.

Thanks again I appreciate all the knowledge on the list. We put a lot of parts on this car but now I have a great 86, 560SL that I have just over $6,500 invested in.

Dave
86 560SL

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Dave