Possible that the heat exchanger itself is furred up after all these years and the water is not circulating properly.
Do the water hoses to the heater feel as hot as the top radiator hose?
If OK, could be a fault in the heater control panel.
300-24, saloon and coupe, E300 24 valve diesel estate
It could also be an air lock in the system, Most cars of that age are sod to blead, when i had a 190 it took me about 30 mins to do it. I even have problems doing the two that I have now but have learnt easier ways