2005 CLK 250 will produce steam from the exhaust pipe when the engine starts up in the morning and will billow out for 5 minutes or so Is this normal The dealership says it is?

On cold mornings it is pretty normal. It's the accumulated moisture evaporating out of the exhaust system as the system warms.

If you are concerned that it Amy be your head gasket leaking, smell the steam when you start it up. If you do not smell antifreeze, you're good to go.