At the time (1999) the ML was pretty entry-level. You could get a C class with a four-cylinder for less. The E class started a few thousand above the six-cylinder M class. Also, at the time, Mercedes had poor product quality (a friend with a W210 E class went through 5 window regulators in 3 years) so service loaners were in high demand. Not surprising then that some differentiation was done between the customers.
Yes, Mercedes has really turned around their quality in the last few years. My wife owned a W204 C350 for 4 years that was absolutely flawless. A couple minor repairs. Now she's in an X204 that is too new to judge but so far so good.
I heard the W211 had a much improved track record from the W210 but I don't have any personal experience.
