My mom had 2, one was a clapped out automatic, one was a pampered, perfectly maintained 4 speed that, according to her M-B diesel specialist mechanic, was the strongest 240D he had ever driven.
Whenever I drove it, the only way to keep up with traffic was foot on the floor, redline shifts, every time, all the time. When doing that, it would keep up with traffic, and would cruise at 85 (which is getting close to top speed). I thought it was dangerously slow, especially the automatic. I timed it from 0-60, I think it was 26 seconds. The 4 speed was significantly better, like 22 seconds. They only have like 67hp, and it is a tank of a car.
The fuel economy was closer to 30 on hers, even though they (especially the 4 speed) was in perfect tune and had only like 150k on it.
The handling was...ponderous and deliberate. THe wheels and tires are undersized. The steering is vague at best, and more of a suggestion than anything else. The sloppiness and lack of grip assisted her in losing control in a normal driving situation, where she spun and hit the guardrail. In a more modern car with some semblance of handling, it would have been avoided.
As with all W123s in the northeast, they both tried to return to the earth.
She replaced the 4 speed (which had replaced the automatic) with an 85 300D turbo. What a huge difference. I don't particularly like this car, but having double the power make all the difference. The 85 model also had a one year only transmission change that makes a nice difference for the automatics. It gets mid 20's for mileage, maybe closer to 30 on pure highway.
After driving diesel 123s for 15 years, she just got an e46 325xiT, and couldn't be happier, and she was about as die hard a fan of those cars as could be found.