Thanks guys for the input so far!
It does sort of come from directly behind the wheel sometimes, but then again when we removed the kneepad it seemed to be from the lower column too.
$350 for the clockspring, jeez! There's a Bremmen for less than half but...it may be you get what you pay for.
I just remembered IIRC there is a paddle shifter mod that involves putting on a heated steering wheel version clock spring to get a path for the wiring from the shifter to the wheel. If I need to replace the clockspring might as well rig up paddles too lol!
EDIT: so I thought I misremembered as the E53 paddle shift retrofits I found looking now involved an E46 SMG steering wheel ($$$), bit I found a DIY for the E38 that will probably work.
Putting the link.here to so I dont lose it lol!
HowTo-> Paddle shifters from Mercedes on a E38 and yes it works! (long)