I am ugrading the audio in my 1982 W126 and have purchased a Becker Audio 10 with fibre optic connector. This will be matched to a Becker 2662 CD changer which I have yet to buy.

Has anyone made a similar upgrade to their W126? I'm wondering where the best place would be to mount the CD changer?

I don't think you have too many options. It is advertised to fit either the glovebox or the trunk. I have a Blaupunkt 5 disk changer mounted in a custom box on the consol in my 380SE, but it's about 7" wide, and the Becker unit you're thinking of is over 9" wide.
You might get away with under the front passenger seat, but I doubt it due to the power seat motors and stuff.
I have a street rod which has an older Mercedes rear seat fold-down armrest retro-fitted into the seatback. What I did to mount a changer, about the same size as yours, was remove the armrest from the seat assembly and carefully remove the covering.
Inside there is a solid block of foam. I made up a 1/8" plywood box to fit the changer. Then, I cut into the foam with a power carving knife to make an opening just big enough to fit the changer/box. Then I replaced the cover and cut it so that the material folds neatly into the box, stapled all round inside to the plywood. Some edge trim was made up and glued along the bottom to make a nice finish.
To use it, I just fold the armrest down and reach back to change the cartridge. I have a glovebox and no need to go into the trunk to change tunes.
Although I have reupholstered in vinyl, I don't see how it would be a big job to do this with the original leather/MB Tex.

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1986 560SL
2002 Toyota Camry
1993 Lexus

Can you use fibre optic in older cars that didn't have it?