That's right - each compartment in an aircraft is classified from A to E, i think. The classifications depend on the access to the compartment, and its ability to withstand a fire - so the cabin is A, with full access (and full-time supervision by FAs) the toilet is B (doesn't have full time supervision) etc.
The cargo compartment on the classics were Class D compartments, no access in flight, so fully able to contain a fire.
However!
As a result of the 1996 Valujet accident, the United States Federal Aviation Regulations Sec 121.314(c) require that after March 19, 2001, each class D cargo compartment must meet the requirements of FAR 25.857(c) and FAR 25,858 for class C cargo compartments and all cargo operation aircraft may have the class D compartments meet the requirements of FAR 25.857(e) for class E.
As to the MEL provision, I don't have a classic MEL anymore!