Your dealer, retarded or not, is correct in this case. The markers above the headlight switch do not light up. I wondered why MB went to the extent to provide illumination on almost every other conceivable control in the car (which I love) but didn't do it on this one where it would have made a lot of sense.
I am further confounded by the fact that in the 2003 C-class loaner I got when I took my car in for service, these indicators DO light up!! That is a $32,000.00 car and my E500 is a $70,000.00 (after taxes) car!! However, when I recently drove a 2005 C-class, I noticed that MB have eliminated this feature in it as well.
I don't always believe what a dealer tells me either, so I made them demonstrate the same functionality in two (2) other 2005 E-class vehicles and it was identical in all: the symbols above the headlight switch do not light up.
The car is so fantastic that I can live with this small design oversight, but it still seems stupid to not provide backlighting for a control like this, which seems really important to be able to see in the dark, at night, when you would be changing headlamp settings.
NYCPiLot747 you seem like a detail oriented guy, so I am sure it will only be a matter of time before you come across the next stupid design choice: interaction of Tele-AID with the stereo system. You can read about it in advance here:
http://www.benzworld.org/forums/forums/thread-view.asp?tid=1200075&posts=1&fid=18
Also, I am curious, do you really fly 747's?