I disconnect the battery in my '96 W210 every time I park it and I know it's going to sit for more than a few days. Never had a problem.
I always use the plain key to operate the vehicle. I have one of the remote control fob keys but never use it.
Based on an experience I had with my '96 this summer past, I suggest you cycle the locks from the outside the car, if you haven't already. See if that clears the blinking lights and allows you to start it.
What happened to me was: I was running errands and at one of my stops I noticed that locking the car felt "different", as if there was a little resistance to turning the key. I didn't pay any attention to it and went about my business. When I came back to the car, unlocked the door and attempted starting it, it cranked but would not start, and I noticed the flashing green and red lights on the mirror.
It didn't immediately occur to me that the anti-theft system had been engaged somehow. After multiple failed attempts to start the car I began thinking about those blinking lights, and realized the car was not starting because of that system. So I stepped out of the car, locked the doors with no problem, then unlocked the car and I was able to start it and carry on. I've not had trouble with the anti-theft system since then.
I suppose there are different things that will trigger the anti-theft system, and a simple lock/unlock cycle might not clear you problem, but it worked for me.
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