A Cummins 4BT may seem a bit underpowered if you leave it stock - but they build up like a 6BT and you can easily make more power than a stock Jeep's driveline can handle. At around 800 lbs, they are a bit hefty on a little Jeep's front end. Toss in some decent injectors, a bigger turbo, turn up the IP - and you can twist up the axles and shred the differentials like they were made of play doh.
A GM 6.2/6.5 might be a good candidate - they are lighter than the 4BT and put out gobs of torque. The engine mounts and the transmission bolt pattern are the same as a SBC, so the swap should not be that difficult. Army surplus 6.2's are often available and relatively inexpensive. A J-code 6.2 puts out ~ 150 hp and ~250 lb-ft, that should scoot a Jeep around pretty nicely even without a turbo. This one would be my choice, but I do have 2 of these engines in my shop.
The venerable Benz 3.0 liter 5 cylinder turbodiesel OM617 is a tough one to beat. They put out adequate power that can be enhanced to pretty serious levels (Check out some of the YouTube videos of fast diesel Benzes). There are adapters available to help with the swap. Fuel economy is good, the engines are well known for their durability and there are a lot of them out there. I picked up a rusty 300SD just for the engine, the rest of the vehicle will be scrapped and in between I'll part out as much of it as I can. The net cost of the driveline should be zero.
Save the little VW TDI's for the Suzuki/Geo crowd. It's a bit small for a Jeep. They can be turned up, but to make adequate power it will cost.
Sorry if these options aren't available in California - it's gotta suck to live in that state! At least rust isn't the issue it is up north. It should be possible to find a nice CJ7 and drop a Benz engine into it of the right vintage...