Originally Posted by Jeremy5848

It should be do-able, especially if you have a 1987 300D Turbo (W124, OM603) donor car to get all of the bits and pieces that you will need. Otherwise you will have to scrounge forever or buy new from the factory; neither is pretty.

It's also possible to get a 603 engine from a 1986-87 300SDL (W126). It will be labeled "603.970," I believe, while the '87 300D (W124) has a 603.960 engine. There will be fewer parts that will cross over to the 124 chassis but at least the engine will be almost identical. (I've never seen a list of differences.)

Should you run across a "loose" 603 engine, try to get it bench tested to confirm that it actually runs and has good compression and all that before buying. Rebuilding a 603 engine is expensive: Metric Motors charges $8000+ for their rebuilt OM603s.

As already mentioned, California DMV usually looks at cars smog-wise based upon how they were originally built. There may be an "exception" procedure that you will have to discover. Should you ever do this project, please publish how you were able to change the car from "gasser, bi-annual smog check required" to "diesel, exempt."

Jeremy