I wonder if someone can help with this problem, before I send the car into the garage and receive a hefty bill!

Car: 2003 E220 CDi
When I accelerate hard the revs go up fine and I think go into the red and I see a bit of smoke in my rear view mirror. Then my revs will drop right down and will not go up above 2000rpm and my speed is very sluggish and the car will not go over 40mph.

If I stop, turn off and then restart the car, all is fine. This happened to me a while ago but I ignored it as a one off. Then it happened again the other day when I was joining the A406. I had to accelerate hard as i was joining traffic from a side road. The car accelerated up to 50mph fine and the revs were high. Then the revs dropped as did my speed. It very slowly and only went up to 40mph and that was whilst going downhill. Fortunately I was able to get off quickly. After a restart, all was well.

Has anyone experienced this and more importantly, does anyone know what he cause and solution is?

Many thanks in advance.