Nice review. You guys have described the exact reasons that I bought the Berlin taxi, I couldn't have found better words (I guess that's why you're the pros). I've had mine since May and other than the car being a little too large (did you notice how wide it seemed?) and a few quibbles I've been happy.
My last car was the previous body E300 with the old 3.0 and it was a little sluggish which is part of the reason I went with the 350...the DI 3.5 is a decent engine. The Sport/Economy button only affects the transmission as far as I know but it really changes the behaviour of the car. My car also has the 'sport' option (they need a more accurate word) which includes larger cross drilled front brakes, stiffer suspension and 18" wheels...I think the net is a slightly worse ride, less attractive wheels...slightly tighter in the corners though.
Fun sidebar: When I bought my new car the E300 had just arrived at the dealership and I had to argue with two MB sales people that the new E300 had a 3.5 and not the old 3.0. They insisted that I was wrong and the engine was still the 3.0. Best part was that they were shocked/aghast that a MB customer would even assert a technical spec. detail.
Twice now I've opted for AWD over the diesel...I always second guess this decision until winter comes. I love driving the car on cold days with snow-packed roads (with snows). Mercedes has figured out winter performance plus the car (at least my previous one) easily overcomes our -35c temps with fast, thorough interior heat, best heated seats I've ever experienced and of course the heated steering wheel.
Interesting the mileage you experienced (10.7?) After 4,500km I've averaged 10.2 and I think I'm heavy on the gas pedal.
Anyhow, there are other good cars in the this segment (5 Series and I'm increasingly curious about the new GS) but the E350 makes for a fantastic daily driver for me...great way to begin and conclude the workday.