You have great brand awareness Rob and I echo your sentiments that money doesn't buy good taste. But let's get back to issue at hand here, primarily that of Mr Trout's assertion that, in a nutshell, model diversification has led to dilution of the Mercedes Benz brand cachet.

Whilst Mr. Trout has a far more illustrious career and resumé than I, one has to at least enquire: is the model expansion within the MB stable solely responsible for Mercedes' "brand schizophrenia"? Even if your answer is a resounding yes, I'd go further to ask, well so what of it? In an industry driven by such rapidly changing market forces, aren't MB vindicated in their model expansion drive? Shouldn't they be lauded for having the vision to change? If other manufacturers such as VW took steps to move their brands upmarket then surely it's an obvious counter-tactic for MB to introduce smaller, downmarket models?

This is the 21st century and car design has evolved massively from the early nineties. The introduction of upmarket SUVs and versatile people movers have really altered people's perceptions of what constitutes value in a car.
Renault asks "Isn't Space the Ultimate Luxury?" Quite, to a family of 5 a Renault Espace is eminently more "luxurious" than an S-Klasse for example. Enter the crossover concept, because the boundaries of convenience and luxury are becoming ever more blurred.