2007 MB E class 350 can I update the Navigation system and add read camera?

Do you plan to keep the car? If so, you will probably be better off replacing the entire unit with a new after-market such as Kenwood, Pioneer, etc. They come with Nav, HD Radio, Satellite and input connections for a camera. A newer unit will have much better resolution and more features. These units are available in 6 inch and 7 inch versions. That is probably better than what you currently have. Dash kits are available for all of these that will make your installation look factory. As for cameras - You would be surprised at how many good and low priced auto cameras are available on E-Bay. The most common type attach to your license plate and the wires run into the trunk to connect to your backup light.