So I think I solved the mystery of the 1/2 tank dancing gas gauge dilemma that plagues many Mercedes owners.
Here is what I found.
1. Initially I suspected a bad fuel sender unit so I pulled the sender from the tank and did a ohmmeter and continuity check on it. No problems.
2. It was mentioned before that the cold solder joints on the actual gauge itself may be suspect. I removed the fuel gauge from the instrument cluster and checked that module.
3. After pulling the multi-pin connector from the gauge and reviewing how these fuel gauge mechanisms work I began to suspect that the heater coil component of the fuel gauge might also be heating up the pin connection on socket 3. After 17 years of these heat cycles maybe some oxidation has built up which causes the erratic behavior at higher resistance (ie lower current) values beyond the 1/2 tank mark.
4. I purchased a product from RadioShack called DeoxIt N/ DeoxIt G which is an electrical contact deoxidizer and applied the DeoxIt N to the pins and sockets... soaked them overnight... then applied some horrendously expensive (thankfully there was some @ work) Stabilant 22 (think of it as "aqueous solder") to the pins to improve continuity across the socket/pin bridges.
5. Problem solved. It now appears that enough oxidation was probably built up across the pin/socket to add an appreciable amount of resistance so the gauge was "seeing" that resistance beyond 1/2 tank. Intermittent contact from normal vibrations when driving probably caused the gauge to dance.
So lesson hear is... after ruling out the fuel level sender the next thing to look at is the condition of pin 3 which connects the sender positive to the gauge. Don't underestimate what all those heat/cool cycles can do to the integrity of this pin. Probably explains why the fuel gauge is usually the only thing that goes wonky since it may be the only mechanism that relies on a heating coil to expand and contract the bimetallic strip used for the gauge function (I know that the economy gauge works off vacuum but not sure how the oil pressure or temp gauges work).