I am able to move the rear axle to move in and out approx. 1/4'' is this normal

If you are referring to the outer bolt that keeps the axle tight through the hub splines then that value seems normal. The nut would be approx 32mm or 1 1/4 inch fine thread.

There may be a slight amount of end play in each rear wheel if rear wheel drive. This is normal axle end play with a solid axle. If the rear axles are CV joint type with a small differential, suspect a loose/worn wheel bearing/hub assembly

1. Support rear of vehicle on jack stands,
2. remove rear wheels and brake drums,
3. put drain pan under rear end,
4. remove rear end cover which will drain the oil,
5. remove the spider gear shaft so that the axles can move inward,
6. Push the axle you want to remove toward center of vehicle
7. Remove C clip from inner end of axle
8. Pull out axle

Somebody has scanned the whole factory manual and it is available at the attached link as a PDF file
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could be rear wheel bearings - they come as a complete assy with brake hub - approx $45 each side - 1 hour per side for replacement. Also replace the rear sway bar links $8 for a set - other than that you could have a bent wheel and or loose rear control arm bolts - remove the rear wheels and check all mounting bolts - I had this problem and my rear end felt like it was shimming when I went around corners - 5 minute fix

yes thay will have usually around an 1/8 to 1/4 inch of play is normal

I am not an Mercedes expert, but if your rear axle is not solid from one side to the other, you have one of a number of hinged floating rear axles. These may simply require an alignment, just as the front end requires.

With excess wear on the inside track of the tires, the inside of the tire is pitched down lower than the outside edge. Most rear tires are set to run level or slightly pitched to improve handling.

If your rear assembly is not adjustable, the connecting bushings are worn on the linked suspension or the rear axle bearings have excess clearance.

Go somewhere to have a 4 wheel alignment, not to be confused with 4 wheel drive.

Please rate my info.

Those axles are held into the rear gear housing by two c-clips, and kept separated by a steel pin that screws in between them. If your rear axle gears dont have proper lubrication, it will suffer wear and tear internally and likely have that type of sideways play you described. Replacing those parts requires you to have some knowledge of the gears inside that rear housing. It's not too difficult otherwise.

In order to remove the axle, you need to go in through the rear pumpkin. Take the back plate off the rear pumpkin, then you will see where your axle comes in through the sides. Go back to the outer end of the axle, (where the tire goes) and push inward on the axle. It shouls move in about 1/2" or so, just enough to remove the clip. The clip should fall out easily if it is turned in the 'down' position. Then you will need to remove the pins that run through the axles themselvs, and the axles should pull right out to the sides.

If this has the 1 ton style axles; in that the axle is removed by removing 6 or so bolts at the outboard end and the axle slides out, you have to pull the axle and then the internal retainer nut and the drum/hub assembly should slide off the axle.

Make sure you have some silicone for the axle end when you reassemble it.

Jack up the front end and put stands under it and block rear wheels. Look at axle boots and see if they are cracked. Try turning wheel back and forth sharply and see if you can hear any clicking. Problem could be outer axle joints. If the boots are cracked or you hear a clicking noise you will have to replace the axle. The axle and boot come as a complete unit. Please let me know what you find out.