Here is some more info you can use with your dealer:
I have had a 2005 E500 since late October 2004. I have had a number of problems, although mine were more "irritating" than "debilitating" like what you are describing. My service rep says he is keeping up a detailed history of the trips to the dealership, because, he says, even though my problems have been minor, it is not acceptable for me to be having to come in and get them fixed as much as I have had to, and that ultimately, if this continues, they will have Mercedes-Benz REPLACE THE CAR.
It is unfortunate the experience you are having with your dealer. Although my issues have been a pain in the butt, I have never felt for a second that either 1) my dealer didn't know how to diagnose and fix them, or 2) that they weren't willing to do whatever it takes to solve my problems.
If you haven't done it yet, I strongly suggest that you contact MB corporate and give them your history. If your dealer is taking a half-assed approach to solving your problems, a call from MB corporate will result in a significant and noticeable change of attitude almost immediately.