On the driver side at the wheel, it's oozing grease!
Can that contribute to the clunking noise at breaking, and the feeling like the exhaust is loose or the engine mounts gave up?

I checked the exhaust system, all is good! Also the engine mounts are brand new and well seated.

could be, check the ball joints, they could clunk too.

__________________
1985 300TD Turbo Euro-wagon
1979 280CE 225,200 miles
1985 300D Turbo 264,000 miles
1976 240D 190,000 miles
1979 300TD 220,000

GONE but not forgotten
1976 300D 195,300 miles
1983 300D Turbo 175,000 miles

http://i42.photobucket.com/albums/e3...e485-1-2-1.jpg

Thanks, the ball joint is fairly new but you're right it's a possibility. The tie rod end rubber seemed to have busted at the seem. I had my wife rock the car while I grabbed the tie rod and I felt a faint knock.

yep its the tie rod, its fairly simple to replace.

__________________
1985 300TD Turbo Euro-wagon
1979 280CE 225,200 miles
1985 300D Turbo 264,000 miles
1976 240D 190,000 miles
1979 300TD 220,000

GONE but not forgotten
1976 300D 195,300 miles
1983 300D Turbo 175,000 miles

http://i42.photobucket.com/albums/e3...e485-1-2-1.jpg

I will replace it while I am also replacing the suspension bearing assembly. Remember my bushing issue?

yeah I remember the bearing issue....

__________________
1985 300TD Turbo Euro-wagon
1979 280CE 225,200 miles
1985 300D Turbo 264,000 miles
1976 240D 190,000 miles
1979 300TD 220,000

GONE but not forgotten
1976 300D 195,300 miles
1983 300D Turbo 175,000 miles

http://i42.photobucket.com/albums/e3...e485-1-2-1.jpg

I also have the control arm bushings and also the one that connect to the guide rod. I might as well do a complete job.
I think it's possible to do it all without removing the front spring. Just loosen the shock's top nut then control the lower control arm with a jack. Will that be accurate?

im not sure on a W126, but on a W123 I had to remove the spring.

__________________
1985 300TD Turbo Euro-wagon
1979 280CE 225,200 miles
1985 300D Turbo 264,000 miles
1976 240D 190,000 miles
1979 300TD 220,000

GONE but not forgotten
1976 300D 195,300 miles
1983 300D Turbo 175,000 miles

http://i42.photobucket.com/albums/e3...e485-1-2-1.jpg

Suspension re-works on these old venerable cars yields dramatic changes. I worked on a Euro 280SE a few weeks ago, replaced one guide rod bushing, all ball joints, front shocks and one tie-rod end. It changed the car from a rattle-trap to a fine riding car. The guy who owns it has had it since the late 80's and prefers it (even when it had worn suspension) to any of his newer cars.