I have an 89 300E, and it won't rev over 2000 rpms while in drive, but it will if I shift up through the gears. Does anybody know what could be causing this? Im thinking it might be the rev limiter but not sure?

Check the sifter rod bushing for wear.

im trying to figure out how that would effect how the engine won't rev

If shifter rod bushing is worn, the NSS contacts can still be in N position even though the trans is in Drive gear.... and if they are , there is a rev limiter circuit for N and P.
When you shift manually you are not having the problem because the NSS is not retaining that position.
Just a possible consideration from what you have stated you have done to get it to work by shifting manually.

I don't think thats my problem, because I didn't mention that it works fine in every gear but drive, even in park and neutral it revs all the way up. so I think theres something else wrong

In that case , it is another problem.