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holding 1st is normal...
when the car is cold so that the cat warms up faster. Shouldn't take too long though, maybe an 1/8-1/4 mile to warm up and shift normally after that. I also agree with checking the rear end dif again, bring it to a benz place and put Redline syth oils in the tranny and rear dif to smoothen and quiet things out...my old/sold '92 190E 2.6 started making noises at 120,000 and those fluids made a noticeable difference in my tranny; yours may have more issues but try it, cheaper than another re-build or new tranny at this point. Somewhere I heard those trannys should last 200-300K miles with proper fluid changes...mine was OK at 136K when sold. tell us how you make out.
Jim
1992 500E
1986 Scirocco 16V
1995 Volvo GLT
1999 Chevy K-1500
1995 500SL (very soon)
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