I'm not from Australia, we're over in West Africa, but here we've had the same experience with the diesel Jeep. We bought our 98 Cherokee Sport in 2002 at 72,000km. It had the VM 2.5TD. In the next 50,000km We had a couple of water pump failures, some overheatings, and a motor rebuild top and bottom with some used heads that had been tested. The new sleeves maybe weren't pressed down enough and we had a hard time getting the heads to seal. When the bottom mains gave out, I decided that this motor was too expensive for my means and too complicated for the mechanics we have here. Seeing it sit for a couple months with no engine and rusting away made me ready to do something radical.
It now has a Toyota "L" naturally aspirated 2.2L diesel, from an old Toy pickup. That is a big comedown in power- only has about 60hp. It takes a long while to get up to 90km/hr, if it ever gets there. But it does fine on the trails where I really need it. The engine is lighter than the original so the suspension doesn't bottom out nearly as much as before. Consumes 12 liters per 100km. Has the original 3.73 Dana 35 rear end. Not much power for 4wheeling. There are other Toy motors with the same block with more displacement and turbos and electronic fuel injection and with all that you can get up to 90hp. But I wanted this to be real simple, mechanical, nothing electronic. Everybody here can work on this engine and parts are abundant and reasonable.
The mechanic swapped a Toyota input shaft into the transmission and the Toy bellhousing bolted right up. He adapted the clutch's hydraulic hose from the Jeep's master clutch cylinder to work with the Toy's slave cylinder (external). The motor mounts were made up by a local welder but hang on rubber bushings like the originals.
Here is the thread that gave me the idea.
http://www.jeeps-offroad.com/f41/eng...housings-4740/