On my 1992 300SE the overdrive gear is activated by a microswitch that snaps into the passenger side of the shifter housing. A rather inxpensive part and easy to replace. You may need to peel the carpet back an inch or two to access it.

The problem that caused me to replace it was lack of 5th gear engagement. After throwing a new solenoid and valve body (and the switch) at the problem a MB tech discovered that the hard plastic vacuum line coming off the trans had become brittle and cracked. I know better, always check lines first, but I could not see a break. Expensive lesson - again!

Tim