I think the diesel engines would give your drive train a bit of a hard time, and I wouldn't expect the gearbox to live too long behind one. You would also need a different adaptor plate than the holden one.
The 186 is an easy and cheap engine to fix. Did you have it running off the fuel in the carby bowl to hear the squealing noise, or was that just by turning the engine over? Water pumps and alternators are plentiful at the wreckers, and wouldn't cost much to change.
Oil leaks could be as simple as the rocker cover gasket, side plate gaskets, or sump gasket - all easy and cheap to fix. I would drop the sump off anyway to retrieve the busted bit of the fuel pump. A new or secondhand unit is easy to fit.
Unless the engine has something seriously wrong internally, I would just fix it up - heaps easier and cheaper than another engine transplant.
Cheers - Gav



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