What is the weight distribution front and rear of a stock 67 Waggy? I would be curious to know as I have a 67 with the same engine...
What will the modified TDI's power and fuel consumption graphs look like? If the TDI engine can move the beast within its efficient powerband, then it should get great fuel mileage and provide plenty of room under the hood. What size tires do you plan on running and what gear ratio's in the axles? If you have all that data, I could plug it into the spreadsheet I made for my conversion and get you some HP/ MPH / RPM numbers back, if interested.
New, I think the 327 puts out 250-275 HP stock and a healthy amount of torque for a gas motor (340+ foot pounds). If you are used to driving it now, you might want to factor that in to the performance expectations you have when the TDI motor replaces it.
As for transfer case:
https://www.novak-adapt.com/knowledge/nsg370.htm
This mates to 241 and 341 transfer cases. These are not full-time and can not be used on pavement at highway speeds.
I used a NV242 "Select Trac" in my Liberty CRD. It provided 2wd, 4-full time, 4 part-time, and 4-low. Coupled with Tru-Tracs and ESP it was great in the snow, rain, and dirt roads. It was one of the only reliable things about the CRD. It is still not a transfercase for big tires or hard wheelin, as it is a gear driven case. Perfect for your use-case however. It can be shifted between 2wd, 4-full time (on highway), and 4- part time (off road) as long as you are under 45 MPH. 4-low requires it be stopped or moving slowly (less than 5 mph) with the gearbox in neutral.
Apparently you can put this transfer case in if you are stubborn enough:
http://www.jk-forum.com/forums/modified ... -204830/#b
http://www.cherokeetalk.com/forum/f64/n ... p231-3341/
http://www.naxja.org/forum/showthread.php?t=949702
I am going with a 4bt swap instead of a 6bt for weight distribution concerns. I want to keep the weight gain down and keep it more balanced front to rear. I don't want 1200 pounds up front digging me into mud. The 820 pounds of the 4bt is still more than I want, but I am putting it as close to the firewall as it is practical and may move the front axle forward. I just don't think a smaller commonly available diesel engine will do for my application (37 inch wheels and 5400 pounds or more).