I had a sneaking suspicion when the 500E arrived that I was due for transmission trouble. The seller was an honest guy, but it seemed he was in the camp of being able to live with some flaws that I wouldn't be able to abide.
The 722.365 automatic transmission found in the 500E is used across the W124 lineup. It's a fairly reliable transmission but does have a certain life expectancy. The tell-tale sign is longer and longer engagement to go into reverse. Two seconds is normal; anything longer is considered indicative of the gearbox being on its way out. My delay was about 4 seconds.
We did a bunch of work hoping to remove any doubt about the transmission. The transmission bushings and differential "guibos" were all replaced to tighten up the gearbox action. While the shifter moved more confidently through the gate, it did nothing to address the delay going into reverse.
No dice. So, after weighing a transmission rebuild, we bit the bullet and ordered a rebuilt transmission from Sun Valley, a known rebuilder of Mercedes gearboxes. It's on order and will be installed in the coming weeks. While unfortunate, it will be a major value add to the 500E's future price tag.