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Thanks to all who responded.
Turned out the the anti-theft pin engaged and locked the steering wheel in security position 3. When this happens, the locking mechanism has to be cut from the Steering wheel and replaced. The dealer estimate was about $900, a competent MB shop did this for about $600.
This is not uncommon in older cars. I did not have issues with the key turning but have been told if the ingnition key is sticky (hard to turn sometimes), get this fixed, it is much cheaper...
Hope this helps someone else.
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