Neil,
Thanks for the note.
Did you also follow the CD to obtain the procedure you outline above?
If I perform exactly what you describe, I would get a very spongy ride on both E500 and E320T. Based upon what I have inferred from the CD, the struts perform a partial support function during driving (unloaded). Hence, if one empties the struts and then sets controller to neutral, one would be driving around on just basic pressure in the struts. On both of my cars this results in horrible driving characteristics. Both cars are also definitely level under basic pressure with control rod disconnected.
Also, Eibach's springs for self-leveling are tri-constant. The initial spring constant for the rear spring is less than that for an E420 counterpart, accounting for the fact that the struts carry some of the weight of the car (E420 weighs about the same). Otherwise the stock wagons springs are not strong enough. This is probably also explains why the wagon springs cannot be used in the E320 sedan, even though the latter weighs some 200lbs less. Eibach also explains that their E320 sedan rear springs also have a higher constant than the initial constant for the wagon.
Finally, the 4mm hole, as far as I can tell (and I have scoured that CD) is mentioned only to set the control point on the controller. Actual ride and control point can be mutually exclusive, since the controller works on a pure linear deflection and not on a 'relative level' based measure.
Pretty confusing to me....
farrukh