I've seriously considered doing this swap with my turbo'd 2L. It came NA, but it's been considerably worked over in the 15 years I've owned it. While this engine would not move the LC around with "authority" neither does my stock 1FZ engine. The plus side would be twice the current mileage I'm getting and a whole lot of simplicity over the electronic and vacuum riddled motor I have in my 80 series. At 8000+ lbs, pulling a box trailer, I average 20 mpg. Empty at 3800 lbs I'm closer to 30. Since I already have the drive train available to me, cost really isn't an issue.
However, if I was starting fresh, with no motor on hand, I'd probably drop an Isuzu 4BD and 700R4 combo. More engine and an auto. I must admit that I've gotten spoiled wheeling the 80 series with an auto. So spoiled that I've also considered adapting a 700R4 to my 2L.
I'm a frequent visitor to the ToyotaDiesel site and I'm fairly certain most engine failures are due to people not knowing how drive a diesel, especially a turbo. If you are going to start hopping them up, you need to get gauges on them and understand what they are telling you.
Here is a pic of me at somewhere around 10,000 lbs. I didn't get it weighed but the trailer was 2000 lbs, truck at 3800, plus driver, plus 2 full pallets of sod and yes, I had dual trailer brakes.
Adam