Thank you Dave for your reply! My apologies to everyone for my anger post. I actually bought beer last night, had 3, and paced back at forth raging at the machine

Last part of my rant, I am not actually a transmission rebuilder. The first, and last one I did, was in the late 80's, a Turbo 350.
The trans is not just being rebuild for the 3-2 coast down clunk but that is a big part of it, and, as mentioned, in that respect it's diagnosis by exclusion. I previously cleaned the valve body (total strip down, spotless, and also cleaned every solenoid spotless using the ultrasonic cleaner). I did
not replace the solenoid o-rings at that time.
During this rebuild, the VB was again stripped, the solenoid O-rings were replaced, every solenoid is again spotless, and I Ohm-checked each one as well as replaced every checkball and check valve as well as the two rubber ones. Each control valve was pulled, the springs and bores were checked. Using the same diagnosis by exclusion,
the only thing that should be left as a possible cause on the VB side is a worn control valve bore OR wrong software in the TCU. Even though I have a vacuum pump I cannot see any practical way of testing the valve bores.
In any event, the VB is on the outside of the trans so it can be revisited later if required. Not ideal, but my thinking is we need to
know for a fact that the internal side of the trans is perfect just in case the 3-2 is still there.
For the last part of my rant, and to get it all out of my system, I viewed my job as this. I would have to do meticulous work and be prepared to spent extra $$ in case I found issues with hard parts, which I did. About $1,500 worth. In effect, I viewed my role as one of blueprinting the transmission. That's my job. If I screw it up it's on me and I'm fine with that. Other than replacing worn items, I see the crux of the job being cleanliness and measuring the clutch stacks and the end play at the rear of the trans. Get that all right and I would be able to drive down the road knowing that internally the trans is perfect. Should the 3-2 still be there, I would likely focus on software next.
Attached is the log of the TCU showing before rebuild adaptation times. I'm no expert on this but the B1 seems to consistently show up as -20 My take on that is that means the TCU cannot adapt it anymore. It could not be manually adapted using DAS. Could be solenoid O-ring, could be clutch wear, but I am certain that has all been addressed, which leaves setting the clutch stack height/gap. For obvious reasons, to me, that is essential.
From my layman's perspective, that should mean that everything from the valve body to the solenoid to the clutch stack is 100% on spec. Thus, if the 3-2 is still there, look to software. That should be the only place the issue could be hiding.
I may well be worried about nothing, but I'm here now. What never occurred to me was that once again I could be let down by third party's (Mercedes or the book I am using). Like I said, the onus is on me to do good work, conversely, the onus is on them to provide me with the actual spec to do that good work.
To your point, it's interesting that we are talking about B1 and K1. Because I'm a laymen I don't really understand how the trans works, but just from this statement from you;
"The 7G doesn't have any Sprags therefore IMHO you need B1 to bite a little later to avoid the clunk, or K1 to release a tad earlier." I can infer that I am indeed in the right area, and that I am indeed right to be concerned with these gaps.
My theory during the rebuild has been this, set the gaps to the minimum side of the spec to give the TCU the most adjustability range over time. This goes towards longevity. Ie, if the gaps are all on the tight side the TCU should be able to adapt them much easier for the longest period of time as the clutches wear. You've now raised a very good point which seems to me to be if the gap is larger than the braking may be gentler, if I understand you correctly.
On the other hand, isn't the TCU supposed to adjust the rate and the pressure and the time to give me that perfect apply? And of course, that comes back to software.....
I may well be worried about nothing. It's entirely possible it goes back together and presto, it's perfect (after clearing and manually adapting with DAS).
But all of the fog could be taken out of this mess if the idiots at Mercedes, that specifically tell you the trans must have 8 B1 and 8K1 clutches, had actually also given the specs for those stacks....
When you explain to me what's happening during 3-2 coast down with respect to B1 and K1 it's as if a light is going off and that is encouraging. It means all the rouble I am having is being focussed in the right area. Bear in mind, when I look at the log (attached) all I know is the MB seems to indicate anything from -15 to -20 is on the bad side with -20 being out of range.
Lastly (I promise!) It's beyond me that a trans from 2006, that I think 8 million of them were made, has a documentation issue! You would think that people twigged on to this long ago and that MB, or the industry, had a bulletin on revised charts for clutch gap and that the MB service manual would have been updated. How the hell can someone, in 2022, be 'discovering' this for the very first time? And for that matter, what the hell have the rebuilders been doing all these years?
If you'll bear with me, I'll send you a quick PM about some more confidential stuff on this issue. But many thanks for your reply, it has confirmed for me that I am in the right area and that is huge.