Sounds like you have made up your mind. However, having owned and raced many hydraulic clutch vehicles, I will maintain that this sounds like a lack of clutch disengagement. Typically that is from worn throw out bearings and components, or more typically, air in the hydraulic system. Fluid level is only part of the story.

Second, if a shop is quoting you $5k+ for a replacement transmission for an 18 year old car, it's time to find another shop. Your best bet will be a used transmission and an independent Mercedes shop. These transmissions are very tough, and a used one wouldn't scare me in the least. A new clutch would be a good idea. The whole thing should cost in the neighborhood of $1000-1500, including labor. Much more than that is crowding in on the value of the car.