I've driven the E350(non sports) a year ago, and I can tell you that the ride is very comfortable and quite, but it is not a S-class. My family owns a 03 S500, and the ride in the S-class is much more comfortable. But because of this comfort, you are going to pay in performance. The S-class is a boat, it really does stick out in a sea of cars due to it's huge size. Due to it's size, it is a bit of a slacker in the turns. On the other hand, the E-class has a good mixture of a sport-sedan/luxury cruiser. It's quite and smooth, yet it can still take a turn pretty well while keeping 5 passengers relatively comfortable. It all boils down to what your family is looking for; in my mind, the S-class and E-class are in two separate categories. If I was in your shoes, I would purchase the E350, just based on the fact that it is a brand new car. It'll hold it's value a bit better, and because it's new there is no previous owner that could have messed with the car. Anyways, best of luck in the choice, you can't go wrong with either.
PS, I believe there is a new E-class coming out in a year or two, maybe your parents may wish to hold back? Or they can take a dive into the new S550, that thing is a beauty. As for the 5-series, i've only ridden in the new M5, so I really can't tell you anything about the 530, etc.
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