I had a very similar problem on my 91 300D. It wouldn't shift past 2nd and I couldn't get it into rev or park with the engine running. The problem was the governor hanging up. The governor can be removed without droping the pan. It is on the left rear of the transmission. Remove the rear mount, drop the trans as far as it will go, use some kind of strap or rope and pull the trans as far to the right as possible. Remove the large snap ring and remove the governor cover. Now this is where things may be different. On my 91 300d there was a snap ring behind the governor weights that had to be squeezed together and the governor assemble would slide out. On my 84 500SEL there is a lock nut and a screw that looks like an adjustment on the other side of the trans that releases the governor. Loosen the lock nut, and turn the screw about 1/2 turn left or right and that will release the governor. With the governor removed make sure the valve in the center moves freely. Clean the governor veeeery good, reinstall, and enjoy. At the same time, I serviced the trans using Moble 1 syn oil. The trans worked better than it had ever worked. By the way, this trans has 295,000+ miles on it.

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84 500 SEL (307,xxx miles)