I have a 220 CDI and too have a rust problem on the rear arches! My understanding of the issue is that both BMW and Merc skimped on the Galvanisation process to cut costs during the late 1990's and 2004. So owners or potential owners of cars of this era should always keep a check on the edges of the bodywork; boot lid included! So I don't think it is the steel to blame here necessarily? Incidently both companies were fined heavily and have since improved the galvanisation of their cars.
In my opinion, there are two options in treating the rust.
1. Have the metal regalvanised. This is probably the expensive option, but should sort out the problem for the life of the car.
2. Rub back the rust and treat it with a rust beating compound. I have found the Hammerite series very effective for this and not too expensive. As the arches are normally not visible, I use smooth silver hammerite, which is quite a good match for mine, 3-4 coats. So far so good. I've only had to touch up one alittle area once in a year. I've also treated a couple of visible areas and then used the correct touch up paint.