Yes that is the steering lock motor that is heard.

In your case it seems that the key has gone dead. A colleague of mine has a W210 E430. His key started getting iffy and would act like the one in the video.

Finally it went dead - He did have an old motorola type key that came with the car - That immediately fired it up. He promply got himself another chrome key. There was a dodge dealer that knew him since school and they had a unit that could test that key - Dodge use similar keys. It was not bouncing back anything hence deduced the key was bad - he bought his key from the MB dealer down the highway - only they have the build codes of the keys.

The dodge service man told us that these keys are inductively charged for a moment and are supposed to answer back to the car. Once that function goes blind or dead your key is scrap. If the key receptacle goes bad - you are in deep doo doo as its quite pricey.

You should be able to unlock the car with the mechanical key in the door and that should start the engine also....the "failsafe" function.

The electronic ignition cars dont have a receptacle for the metal key blade. They only have a big socket to accept the nub on the fob which is sort of shaped like a big key (fisher price shape)

Lots of people have had a SMART key go bad. But no one has posted that two SMART keys have gone bad at the same time (OP's original post).

As most of these cars have a giant relay junction like our W210 have a unit called K40, can it be that the source of power is from there ergo no activity in the key switch.

Good idea Zulfiqar, I electronically Checked the 7 fuses in the K40 module and all are good, have not check the relay in the module.
guess I need to find a wiring diagram to find out what circuit powers the EIS that energizes the chip in the key to authenticate it.
anybody have any clues to find a diagram on line?

I had the same problem in the same car. In my case it was a bad EIS. That is about a $1500 job at the dealer since you have to get new keys also. I think I had a thread on here about that.

Another person said they fixed theirs with new keys and that thread is around also. That will still cost you about $300 per key, and the computers can only accept so many new keys then you have to buy a new one.

That is a tough one surely, the EIS can only be bought brand new from MB and is then married to the car, I think its sort of a CAN BUS junction.

It only takes 8 keys at max.

clarification: i believe it is 8 active keys at the same time. 24 keys over the
life of the car/drive authorization system, then the system must be completely
replaced.

I don't think it is 24. Maybe that is a more recent improvement.

pulled those figures off the MBUSA technical CD for the Smartkey.
I guess this may differ than that of the 203 so I should have posted the
cautionary verbiage, ie 'your mileage may vary"

update: yes, the 203 lacks the detailed description found in the 210 CD for the
drive authorization system. so it may have a different set up even though it is
a Smartkey compliant but the devil in the details may certainly differ

Well, we are talking 202 here...

I was reading a bit online where a guy had a similar problem in Germany and MB dealer replaced the EIS.

he did claim that at one point he got the thing to start by shooting the EIS with a hair dryer. How good is that I dont know, but its a free test.

He also claimed that MB pressed on the fact that the original keys need not be replaced - they will code them to the car.

OOOOK..... looks like ill be grabbing a long extension cord and the Hair dryer this weekend.

I'll let you know what happens.
But I'll know not to have both keys in the car at the same when trying to start, due to RFI issues.

Thanks Raymond, for the PDF. it helps put to rest the rumor that the Transmission lock is also part of the DAS-3 system, as I have heard that it needs to be coded to match the ESL and the EIS and the ECU.