From my observation, during the the DC era, quality steadily declined across the range. They lost S-Class buyers to the big Lexus in droves because of this. The R230 was a reliability nightmare. They also during this time attempted (and continue to) dive down into the saturated lower price points. VAG, the BMW 3-series, and the luxury Japanese makes have a stranglehold on this segment. They now even pitch a sub-$30k Mercedes. That's Chevy and Ford country. How much Mercedes are you really getting for $30k? But they've made some market-share inroads. I certainly see more Mercedes in neighborhoods I didn't 15-20 years ago. At the expense of marque reputation, IMO.
Since parting with Chrysler, quality has improved. But it's not the same builder they were before 2000 in my opinion. I don't think their vehicles are built to the same bank vault solid, run forever, over-the-top engineering standards they once were.
If you're looking at a C-Class, I think there are better alternatives at the price. I'd also still be reluctant to lay down long green on an S-Class unless I was only going to have it for a couple of years; new, that's a lease car as far as I'm concerned. High technology and practical technology are very different things.
The luxury maker to watch right now is Jaguar, who seems to have gotten their act together. If I buy a new car soon, that make is first on my test drive list.