Guess! Aarrgh it is indeed hidden inside the dashboard. Mine only works on full blast, and then it makes horrible terminal-sounding grinding noises. I have had this before on W124s, which are easy peasy to get out from under the bonnet, oil, and replace and then life is warm and serene. Not with the W123.
You can get a glimpse of the blower if you look from outside - I can't remember which bit to remove, I think it's the nearside fresh air inlet grille just in front of the windscreen. You can squirt WD40 or whatever you like into the vicinity of the motor bearings but it won't make any difference.
Seems to me that you have to first remove the steering wheel, and that is where I came unstuck. You need a big allen key to fit the bolt in the centre, and I think you would need an air hammer wrench to undo it while you hold the steering wheel still. I do have the required Allen key which fits a 1/2 inch drive socket but using a rachet or power bar just exerts a sideways force on the key so it pops out. You need to hold the key in the bolt while just exerting anticlockwise force on it and no sideways force. There is a special tool of course, which mere mortals do not have access to. Then you will need the two week factory training course in how to remove the dashboard.
I have tried to get at the blower by removing all the controls such as temperature and fan speed panel, the gearbox surround, radio surround but I just cannot. I am going to have to give it to a specialist classic merc chappie, and fortunately there is one about 20 miles away. Not on a bus route though . . . . . .