My first Mercedes was a 114 with crunchy stuff all over the interior of the car, like yours. It's the horse hair pads that become brittle and literally crumble away. You sagging down is a result of the pads going to dust. I paid a couple thousand bucks for new seat covers, but didn't know enough to order the pads at the same time.
Thus, I went to the local Good Will store, and raided my stash of unused and unwanted blankets, and formed them into the shape of the pads. I used standard needle and thread to tie all the pieces together and then fastened them to the seat springs. After a day or so of seamstressing, I put the new skins on and had awesome support. I think I paid something like $10 for the blankets I bought, whereas the pads are a couple hundred each.
I'm sure there's a purist out there puking right now, but it worked and I didn't pay a lot.
You can also go to your local crafts store and buy fabric fill (fiber fill?) or bunting, and do the same thing. After the seat cover is on, no one sees the sewing job, and the only two to know better are you, and your ass.
A tip from experience: Do this with the seats out of the car. Removing them entails taking out four bolts (one per corner) and you're golden. A 15 min job, if that. To remove the seat skins is very very easy too - with the seats out, compress the springs (someone sits on the seat for you) and the skins slip off. I kept them compressed by tieing them with fishing line. Once the padding was done and the skins were on, I cut the line and released the tension on the springs.
In all, my whole interior/seat redo job took me an easy weekend, and that included beer and bragging about things I hadn't really done yet
I wouldn't touch a shop for a job like this - it's something you can do literally in your living room, while the girlfriend busts your butt because she just vacuumed.
New seat covers will cost you about $4000 for the whole set. Try a google search for World Upholstery - I use them religiously. You also might look in the pick apart yards for workable seat covers. World UPH has dyes that'll match your old stuff, and those are easy to use too. I have experience in such matters as well if you want to go down that road