Stick with a rover V8 as I feel it makes the vehicle.
LP Gas is the go.
I think a 4.6 litre motor is perfect for a bit of zip.
The TDI 300 just fits and there is information on doing this some where, I have also heard the TDI is not too happy about pulling the 101 around at speed due to the constant wind drag of the 101.
Gearing with a Diesel is no problem as one of say 4 littres would have the torque to use higher ratio diffs.
I question If the weight increase with standard steering and brakes is worth the effort as is the increase in noise(sitting beside the motor).
A 4.6 rover 8 will work easier than the 3.5 and on gas would be the same cost to run as a diesel.
A diesel takes alot of effort to fit in a 101 as the width between the engine mounts is narrow, gear shift changed etc.
The motor I would choose is the Isuzu motor as used in the Perentie Landrovers as it already used with the correct gearbox on that vehicle
(if it fits)
Also remember the 101 has a special short bell housing and tail shaft lenghts front and rear is critical and it is not a good idea to move the transmission forwards or rearwards.
To me the rover eight is a good donk and is a good match with the rest of the vehicle from a drivers point of view to weight balance and the fact the body is cut out in a way to allow most work to done in situ with this motor.
Just remember the 3.5 motor is the smallest one of the V8s and LP gas is not a problem to them.
LPG tank placement has been worked out to perfection on 101 blood boxes over seas.
Ron


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