i gather the smallest is the 4BT and yet that still has many people raising eyebrows in regard to the heavy weight. Of course if it's as heavy or a tad heavier then the 4.0 then ths may be a non-issue. Other options may of course include toyota, volvo or other manufacturers' diesels but id like to keep it dodge/chrysler if i can.
Ive decided that i will refuse to swap in a 4.0, or v8 into my jeep. It came as a 4cyl and it will remain as such. Once i start sailing, im going to have a lot of time off when im back home and id like a project. Overhaul the 2.5l and try and make it the most powerful 4cyl it can be....or convert to diesel and tweak that. Im thinking no matter what i do to the 2.5l, i will be able to out perform it with a diesel.
You really need to look into what diesels are available and their specs. I've mentioned before that the 4BT weighs in around 745lbs wet. The 4.0L is 525-ish lbs and the 2.5L is around 300 lbs wet. So it is not an optimal choice unless you're really going to beef up the front suspension.
You are not going to find a Chrysler/Dodge engine that will work. The 4BT is an industrial engine, used for powering pumps and generators, not vehicles. It's not DOT certified which can get you intro trouble. Most other engines are going to be too old to swap in according to federal law. Now many get away with them as not all states have state inspections, safety or emissions that would catch it.
Legally, a 2.8L Jeep diesel would be the most logical choice as it was used by Jeep and is 50-state legal. Problem is it's computer controlled so you have to deal with all of that. Then there is the faulty EGR valve which is an expensive fix.
I think the VW 1.9L is an interesting swap but it might be difficult to find conversion parts. Most VW swaps I've seen are old 1.6L's without the computer. Toyota never offered a diesel in the US, neither have Nissan nor Mitsubishi. Volvo's diesels are OK engines but I haven't heard of too many swaps. I think a VW or Merc swap would be a better choice. I've heard the Merc was offered as a Diesel 300 up till the early mid 90's but I think the last US one was back in the late 80's...