The master can be not holding pressure when the booster is aiding the pedal pressure...and that would be the white smoke complaint..the master rear seal leaks into the booster and then the booster line fluid gets sucked into the intake and burns out the exhaust as white smoke.
So, pull the booster line and see if there is brake fluid in the line or booster chamber.

As Ferdman states, excess pedal travel will ruin a master seals.
Here is the trick to get around that possibility:

If one bleeds brakes with the old conventional pedal pump procedure, it is important to put a block of wood under the pedal so the master pushrod can not extend into the extreme ends of the cylinder..it is that cylinder end stroke that damages the internal master seals..resulting in a soft pedal and possible bypass leaks out the rear seal of master, into the booster. See guys ruin their own M/C all the time , when this Simple precaution eliminates that problem..
The block simply restricts the rod to normal travel, were the cylinder is well mated to the seals..........

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A Dalton

Will the master cylinder repair kit solve this problem. Rather try $30.00 instead of $200. Thanks for the help guys. I was just going to re-bleed the brakes again but might wait till I check the booster. Still decent brake power. Could I loose all brake power. Just wondering if I can drive to work today.

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The Dude

1987 560 SEL

Where is the brake booster located? I am looking for the round tin looking thing but can not find it.

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The Dude

1987 560 SEL

On the driver's side behind the secondary firewall. The master cylinder attaches to it. It looks like this.
http://catalog.peachparts.com/ShopByVehicle.epc?q=1987-Mercedes--Benz-560sel-Brake&yearid=1987%40%401987&makeid=63%40%40MERCEDES+BENZ%40%40X&modelid=6308%3AMBC%7C1547%3AED%7C10000060%40%40560SEL&catid=241658%40%40Brake&subcatid=241730@@Brake+Booster&mode=PA
Mark