Pull the coil wire off the bottom of the cap, secure it near a ground (any under-hood metal) and verify whether you have spark when cranking or not.

Check the timing belt as well to make sure that it is turning. To do this, observe the cam through the oil cap hole while someone cranks the engine. In this car, the cam must turn in order for the dist to pulse and make spark.

(On 90+ Turbos, it'll spark whether or not the cam is turning.)

Try to inspect the other plug on the bottom of the dist, that's your pickup for the ignition - the Hall sensor. The plug may be really fragile so be careful wiht it. The connector has a metal band on it, that you squeeze and pull to remove.

If you get it running, try wiggling this connector and see if you can make it stall. A few years ago, I had to replace the distributor (bought a new Bosch unit, but used may be ok as well) in my 88 740GLE. Solved all the intermittent stalling and misfiring problems.
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Rob Bareiss, New London CT ::: 92 244-M47-208K ::: Bilsteins, Turbo swaybars, Virgos, Lowered, Group A wing, Tach, 6-Disc, Satellite Radio, Keyless Entry ::: Coming Soon: B-Cam!