water will make the charge air colder, therefore denser. On a gasser, it will allow you to dump a ton of fuel in and it will also allow you to run higher compression ratio without pre-ignition. Diesels do not have this problem, so it really does nothing more than cool the charge air. If you were to dump a ton of fuel into the mix (which we can't do with the stock IP), it might help to keep temps down. Otherwise, as Forced said, there seems like little benefit... However, water injection combined with propane injection might prove useful...

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99 E300 Turbodiesel 100k