107 Rear Hub Experts, What is this Broken...
 

The attached photo shows a broken bolt on the top right. Can anyone identify the part it goos into? I think it 's bad as the bolt broke 3/8" inside and there isn't a lot of room to drill and tap.

That is the clamp that retains the upper tube of the suspension link.

Fortunately that is the easy end to work on. I had a similar problem with the 560SEL, the replacement part for the 126 has a 107 part number so the system is similar. If you continue driving with the clamp loose like that the upper portion of the link will work out of the carrier assembly with a bang.

Read here to see how if it happened to me.

I think the casting shot
 

I see the bolt is broken at the separation of the cap" does this mean it's shot? What is that part? The Carrier?

Was yours the cap or just a holder for the line?

The outer most plate is the brake line bracket, under that is the cap that closes the end of the axle carrier to retain the suspension link.

Once you remove the remaining bolt, both pieces will come off. You will have to remove the wheel, caliper and rotor to get enough working room. Can't recall what else you might have to remove right now. Once the cap is off you can pull the link out of the carrier and rotate the carrier up.

Once you get the cap of, you might find you have enough bolt sticking out to get a decent purchase with a set of vise grips. If so, drilling and tapping wont be necessary, but you might want to get a good bottoming tap to ensure the threads are true.

Hope this helps.