The valet key can likely be reworked to fit the trunk / glove box ( at least on my 97 C280 and I'd expect the metal key ML to be the same.). Supposedly the valet keys were NLA and you could only get a clipped head wallet key so I'm surprised you came up with one..

I haven't done this but see no reason it won't work.
Compare the original and valet keys, the original will have a step on the flat side and the valet not. Running this on a milling machine should allow you to cut a step.

Near as I can tell, the ML used a DAS X or very close version just like the 97-98? C class, 97 E320 , 97 SL , 97 + S class. This was a metal key that went into the column lock not the fob with a rectangle that goes into the lock.

There is a RFID chip not a GM style resistor in all of these keys that gets read by the anti theft computer then a signal gets sent to the engine computer to unlock it. The chip gets updated every time the car is started so it a weak battery interrupts this sequence, a bad write occurs. I'd get the battery load tested, I've had otherwise strong batteries drop a cell and crank forever but voltage drops too low while cranking. If you are losing radio presets and clock settings, the battery is failing.

The 163 ML doesn't have an EIS..........