Here 'ya go, folks. This applies to most 123 and 126 diesel transmissions.
There are variations so be sure to check with a knowledgeable source before
embarking on this procedure. And as with all DIY work, know your
limitations before you start.
TRANSMISSION VACUUM REGULATOR TEST AND ADJUSTMENT:
1.) Carefully remove the vacuum line that comes off the "tee" fitting from the large vacuum line going from the vacuum pump to the brake booster. Take a small wire or 1/16" drill bit and make sure the opening is clean of any carbon or build up. Connect a vacuum gauge to the "tee" and start the engine. The vacuum reading should be between 21 and 23 inches Hg. If it's lower the check valve on the vacuum pump is probably stuck open or leaking. It could also mean a leak in the line or brake booster. Identify these problems if they exist before proceeding. Replace the line on the "tee" fitting.
2.) On top of the injection pump is a vacuum regulating valve. On the engine side of the valve is a lever with linkage going to the injection pump. On the regulating valve is a stop pin at the top of the lever travel. With the throttle linkage at full throttle the clearance between the flat on the lever and the stop pin should be 0.5 mm or 0.020". If not adjust the linkage to achieve this clearance.
3.) Locate the vacuum switchover valves on top of the valve cover. Remove the slotted screw on the RH (drivers) side, then lift up and slide the cover forward to disengage the "fingers" on the front of the cover. Lift up and off. Inspect the levers on the two vacuum valves. If worn replace the levers by removing the valves, carefully pushing the roll pin out and replacing the worn levers with new. I believe the part number is 123-304-0220. Couple of bucks apiece if that much. Check this with your parts supplier to be sure. No lubrication is necessary. In fact, using grease or other lubricants can accelerate wear by softening the plastic. Don't ask me how I know. Replace the cover.
4.) Check the transmission "kickdown" cable. This is the cable that connects to the throttle linkage on the RR of the linkage just behind the air cleaner housing. It's anchored by a black plastic block with "fingers" on it and has a black rubber bellows to protect the cable. Pop the cable off the ball joint on the throttle linkage. Pull on the cable to gauge the point where the slack disappears. You'll be able to feel it, as the cable will pull out a few millimeters before resistance is felt. It's at this point you want the ball joint to come together, that is, the cable should pop on the ball at a point where the slack is out of the cable. Making it too tight will cause the transmission to shift at the wrong point. Too loose and the same will occur.
Adjustment of the slack is achieved by turning a black plastic nut on the cable jacket just behind the anchor block. Be sure to inspect this closely, as the anchor block as well as the threaded part of the adjusting nut is often broken or cracked. If the anchor block will not stay in the bracket the cable must be replaced. Same if the adjusting nut is bad. (Not a pleasant job, but something that requires a whole other procedure. It will not be covered here.)
5.) Once the adjustments above are complete and everything is judged to be functioning correctly get the engine to operating temperature and check the transmission fluid level. Road test the car. If the shifts are not satisfactory continue on with the procedure.
6.) Locate the vacuum "tee"on top of the regulating valve on the injection pump. There will be a black vacuum line coming off the tee going to the vacuum modulator on the transmission. Remove this line. Apply vacuum to this line with a hand vacuum pump such as a MityVac. It should hold vacuum for at least 5 minutes, if not longer. If not you should move down to the vacuum modulator itself and check vacuum directly at the modulator (with all lines and connectors removed.) This will determine whether you have a leak in the line or connectors or in the modulator itself.
If the tests check out OK connect a vacuum gauge (you can use the MityVac for this purpose as well) at the point where the black vacuum line to the vacuum modulator was connected.
7.) Start the engine and check the vacuum gauge. You should have vacuum at the gauge. The amount is not critical at this point. If not, inspect vacuum lines and connectors in the immediate area for cracks, damage or disconnection.
8.) If vacuum is present disconnect the linkage to the regulating valve at the injection pump lever (ball joint.) With the engine at idle move the lever on the regulating valve to the full throttle position. Vacuum should drop to nearly zero.
9.) This step takes some preparation. You'll need a 10mm open end wrench or something to gauge a 10mm distance. There is a commercially available fixture that's nothing more than a disk with a diameter of 20mm and a hole in the center that fits the stop pin. You could easily make one, or use a gauge of some sort to judge the distance. You're going to want to measure a distance of 10mm between the stop pin and the lever on the regulating valve.
With the engine at idle get the lever set at 10mm from the stop pin. Check the vacuum reading. It should be between 5.5 to 6.5 inches of Hg. If not you're going to need to adjust the regulating valve.
10.) On the left (driver's) side of the regulating valve is a dome-shaped cover. It's tricky to do, but using a pointy tool of some sort pry this cover off. You'll have to work at both sides to sort of "rock" it loose. Once it's removed you'll see the shaft from the lever along with a nut that locks it in place. Behind the nut (and you have to look very closely to see it) is the shaft with two flats on it that will allow you to get a very small open end wrench on it. Ignition wrenches work very well here. I believe it's 8mm, but don't quote me.
Loosen the locknut slightly. With the engine at idle, the lever set at the 10mm gap, turn the shaft with your wrench to get the vacuum within the 5.5 to 6.5 inches of Hg. Told you this part was tricky, didn't I? A little bit will go a LONG way here, so don't try to turn the shaft 90 degrees. 2-5 degrees rotation will make a significant change. Large adjustments can damage the regulating valve, so go slowly and in small amounts.
Higher in the adjustment range will result in softer and early shifts. Lower will cause harder and later shifts.
11.) Reconnect the linkage (don't replace the cover just yet!) and tighten the locking nut. Remove whatever means you used to achieve the 10mm gap from the stop pin. Remove the gauge and reconnect the black line to the transmission vacuum modulator. Road test the car. If the shifts are good (no flaring or harsh shifts) you're done. Put the cover back on the valve and celebrate.
If this didn't clear up the shifts, it's on to the modulator. . . .
12.) You must have a modulator pressure gauge to do this properly. YOU CANNOT "BALLPARK" MODULATOR ADJUSTMENTS!!!! A gauge can be made with a simple banjo fitting, a hollow bolt scrounged from a fuel injection system and a 100 psi gauge. I won't go into it here, but I can get the specifics for anyone interested in fabricating one for themselves. You also need to know the exact model of your transmission. This can be found on the casting edge just above the pan on the RH side of the transmission. You'll probably have to clean the area to find the numbers. It's in a XXX.XXX format, such as 722.305, for example.
Once you have this information you have to consult a TDM (Technical Data Manual) for the correct modulator pressure.
13.) Directly below the vacuum modulator on the transmission is a 12mm bolt. This is a test port for the transmission hydraulic system. Clean the area around the bolt and modulator well. Remove the bolt and install the hollow bolt and banjo fitting on the end of the modulator test gauge. Remove and cap off the vacuum line from the modulating valve on the injection pump. You don't want a vacuum source on the transmission modulator during tests unless the TDM dictates it. In most cases it won't.
14.) With the proper modulator pressure determined from the TDM and speed that it is to measured at, road test the car while checking the pressure. If it's incorrect modulator pressure will have to be adjusted.
15.) To adjust modulator pressure, remove the black rubber cap on the top of the modulator. Inside there will be a small metal "T"-shaped "key". Pull it out slightly to disengage the top of the "T" from the modulator body. This is what keeps the adjusting pin from turning when the cap is in place and the "T" is fully inserted. With the "T" pulled out to disengage the top portion turn the "T" to increase or decrease pressure as desired. You can do this with the engine running and someone watching the gauge while you turn, or with the gauge in your field of vision. The setting at idle will be pretty close to the setting you get during the road test, amazingly enough.
Put the "T" back in place, replace the rubber cap and road test the car. Don't reconnect the vacuum line!!
16.) Repeat above procedure to achieve the proper modulator pressure. If you can't or shifts are still flaring or harsh, the modulator should probably be replaced (more about that in a minute.)
REPLACING THE MODULATOR:
If the modulator is the original one on the car it could probably stand to be updated. One way to tell is that the updated modulators have a green plastic body and a black cap on the adjusting "T". Order a new modulator from your parts supplier (part #126 270 9279 for an 83 300SD - Ed). It should come with the new modulator and a long black pin. The adjusting "T" and rubber cap will be included loose in a bag with the modulator.
1.) With the area around the modulator cleaned, remove the two 10mm bolts that hold the plate that holds the modulator in place. This is a flat metal plate that indexes in the slot on the neck of the modulator. Getting to the two bolts takes a little bit of gyration, but a 1/4" drive socket can do it. Move the plate out of the way and carefully pull the modulator out of it's hole. You may have to twist it a bit to get it to move. Pull it straight out of the hole, DO NOT ROCK IT!! Using a pair of needle nosed pliers or hemostats remove the pin from the hole where the modulator was located if it doesn't come out with the modulator. Note the way the pin was installed, as there is a little disk that's off center on the length of it. You need to know this when installing the new pin. BE CAREFUL!!! Don't break the pin off in the transmission or you'll be spending a lot of time trying to extract the pieces.
2.) Lubricate the "O"-ring on the new modulator with a few drops of ATF before installing. Place the new black plastic pin in the bore in the same direction and orientation the old one had (I think there's a small disk on it that's off-center on the length of it. I suspect it's to keep the pin centered in the bore. That's what I'm referring to.) NEVER reuse the old pin, as the new pin is a part of the update!! Carefully insert the modulator, twisting slightly if necessary, but ALWAYS keeping it perpendicular to the hole. If you don't you'll risk shearing the "O"-ring off.
3.) Once the modulator is installed put the metal plate back in place, install the bolts and torque to the correct values. Check modulator pressure as directed in step 14. Adjust as necessary.