Ronnie
I own a 1987 4-Matic that has just undergone a complete restoration.
http://www.mbclub.co.uk/forums/bodywork/203841-my-124-300te-4matic-restoration.html
The 4-Matic light being constantly on, indicates that you have lost the 4-Matic and are possibly only getting rear wheel drive. You most certainly will have a permanent fault.
Start with the basics:
1) Is the hydraulic reservoir full? This is located on the RH side of the engine bay as you look into the engine bay. It will have a dip stick on the top.
2) You should have a "test"lever or switch that allows you to enable or disable the 4-Matic hydraulics/system. The lever (if you have that) is located on the RH of the engine bay opposite the reservoir. Pull up to disable and push down (flat) to enable. If the system is switched off? The light will be on permanently.
3) A lot of these cars had the 4-Matic dismantled by removing bits of the drive train. This would be done to avoid costly repairs. Do you have any indication from the previous owner if the system was working?
With a full reservoir and the test lever horizontal you should have no 4-Matic light and all 4 wheels should be driving. Leave the engine running and get underneath and have a look for any leaks. The system uses a fair bit of pressure to pump the fluid. If leaking it is usually a very evident leak, caused by the pressure. If not then you need to get the codes read. On these cars you need to read the "blink codes" by making up a test light. Or take it to decent Independent who knows these cars.
Andy at Wright-Tech in Sidcup knows the 4-Matics very well (he restored the mechanicals on mine). Give him a call and tell him, Bruce said to do so.
They are repairable dependent on budget and willingness to do so. Parts are still available from Mercedes but starting to get scarce now.
One other thing to watch out for. All four wheels must be the same sizes including the tyres. The system does not like mixed sizes. Pressures are also fairly delicate but that would tend to give you a flashing light light. Solid light suggests that it is disabled.
Where in the country are you located?