Merc quality is definitely on the up - it had sunk so low that Merc had to do something about it. However, if you get the chance sit in a new E class and then sit in a 1994 model to see a difference. Merc are still some way off the 1994 quality and engineering levels. In addition their dealers can be awful.
In terms of looks I agree the new Mercs are very handsome. I saw a new CLK 320 CDI with body kit in dark blue and it was fabulous.
However what really got me into Lexus (I used to be a BMW man) was the cost of options. I like automatic, sunroof, sat nav, leather, parking sensors, CD changer etc and these alone will add nearly 6K to the price of a 3 series. In other words the price of a brand new Fiat panda!!!