Halogen Fog lamps built into the head light housings were standard on the 98 c230's. These are what come on when the courtesy feature is activated.
It's most likely just a burnt out headlight, hence the "light out" warning light on the dash.
EDIT: Try swapping the h7 head light bulbs (passenger - driver, and vice versa), if the same headlight still doesn't work, you have a problem. If the problem migrates with the bulb, it's just a burnt out bulb
.