I drove one of those TDI's. They are quite powerful considering the weight of the car, size of the engine, and awesome fuel mileage! I remember being able to get rubber in most of the gears.
I say go for it. Alot of challenges and I preduct your biggest hurdle will be converting the engine to work with the rear wheel drive (tranny?).
And the Poncho is just a clone anyway, so your probably just yanking a boring base or Espirit model drivetrain.
I wanted to do a similiar project but using a 7.3 Powerstroke diesel. But they are a bit too big and heavy.
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