Just some general notes from looking at doing the diesel swap over the past couple of years:
- Avoid the Renault 2.1-litre turbodiesel. It's not a bad engine, but it's seriously underpowered (old diesel technology) and has virtually zero parts support for it in the US. Not knocking anyone who may be running one by saying this, but even as a French car enthusiast I wouldn't touch one if it were free.
- From a swappability standpoint, the 2.8-litre CRD from a KJ would likely be the easiest choice in terms of fitment on paper - you'd still need to come up with motor mounts and would likely want to grab the KJ's 5-speed autobox as well, but a fully-optioned CRD weighs about the same as a fully-optioned 4.0, so likely wouldn't require redoing the front suspension in order to cope with increased engine weight. The downside: it's going to be expensive. About $10-$12 grand if I remember correctly, assuming you don't do the work yourself (which I wouldn't, partly because this XJ is my DD and partly because I know when I'm in over my head). Bear in mind that you're going to have to change out the ECU, TCU, gauges, etc. and make all of it work when it's buttoned-up again; as far as I know, this isn't a drop-in by any means - hence the 'on paper' comment above.
I don't know much about the Cummins swaps, but suspect they'd end up being as complicated as the CRD swap for much the same reasons. Having said that, I'd certainly be VERY interested in seeing one done - using the Mercedes 300TD sounds appealing, but there are some fitment issues there I'm not keen on.
Also, take this for what it's worth (i.e., completely unconfirmed), but I had an interesting conversation last night with someone connected to Daimler-Chrysler. Apparently the new Mercedes S-Class has had its diesel approved for all 50 states from 2008 on. This has effectively greenlighted the diesel JK for the US market, so we can expect to see that engine (or a derivative thereof) in the JKs from either late in the 2008 model year or as a 2009. Jeep's apparently very anxious to raise their CAFE numbers, so assuming that California (and by association the other four states that follow our Nazi smog laws) doesn't pull another 'we were just kidding when we said we'd certify your diesel' schtick on DCX, expect to be able to drive one off the lot in a year or so.
How does that apply to XJ owners? Well, you'll be able to start picking them up as insurance write-offs shortly thereafter. The engines will be ultra-low-sulphur capable and low-mileage, so there'll be another realistic option in the swapout field soon assuming that everything goes to plan. I've already decided that the JK is going to be the XJ's eventual replacement and the diesel will seal the deal - but at least there's some light at the end of the tunnel for anyone planning on keeping their XJ a bit longer.