Is it imperative that a 1989 Mercedes-Benz 420 SEL be run with Premium Unleaded gasoline? The original owner I received it from used Regular Unleaded for the last few years he owned the car. What would using Regular over Premium do to the engine / gas mileage?

Using regular gas may cause engine knock, which, over time, can be very damaging to an engine. What you save in gas may be more than offset through damage to the engine. It's best to use what Mercedes recommends for your engine.

There's more energy in regular gas than premium. Anti-knock additives in premium gas allow for a more even (less explosive) burn. Therefore, if the engine does not knock on regular, and you do mainly freeway driving, you may get better gas mileage using regular gas. The difference won't be much, however.

What do you mean by engine "knock".

Engine knock, or ping (pre-detonation or incorrect detonation) can be caused by many different engine and fuel related variables. Unfortunately, higher octane ratings can actually cause this ping or knock.

The reason? Higher octane fuel burns slower than lower octane fuel. If base engine ignition timing is incorrect, the slower burning fuel will combust at an inappropriate location in the engine stroke. Thus, causing knock, ping, or "rattle"

Other factors could well be a faulty Exhaust Gas Recirculation Valve (EGR). If the EGR valve is open too long or too soon, it allows inert gasses into the combustion process and won't allow proper fuel combustion.

In consideration of base ignition timing: if base timing isn't set correctly, ignition advance will also be incorrectly compensated for.

Whew! Now, having said that, the answer to your first question is, no. It isn't imperative that you use Premium. As txgreasemonkey stated in his reply, the premium fuel will be less explosive (read: flash rate or starts later) but it will burn longer, thus potentially resulting in knock (ping). Fuel mileage differences, up or down, will most likely be negligible.