I've done the reverse of this swap, Turbo to NA....

3. Looking at picture 3, you can see that the “Transmission Inhibitor Switch” is round. On my father’s 81, it is rectangular. The problem is this; on the reman 84 tranny the switch is round. Can the wires be simply spliced from the old switch and hooked to the new round one?

Yes, You can splice the new connector into the car or as I did, cut the wires and I found red female connectors at Radio Shack which fit the male connectors in the neutral saftey switch. The pins are numbered on the plugs, 1-4 and they are the same wires on the round and rectangular connector.

4. On the older 81, apparently there is a vent pipe that runs from the air cleaner to the oil pan, On the newer engine, it is eliminated. Is it necessary to hook this up? Does he need an air cleaner system specifically for the 84, or will the 81 work by simply closing of the air cleaner’s connection to the vent pipe?

Use a correct Turbo air cleaner, they are bigger because Turbo engines consume more air....

Pay attention to the mounting of the engine shocks, Your NA engine should have a "U" shaped bracket bolted to the upper oil pan which holds the 2 engine shocks. Test to see if it fits the turbo motor... The crossmember which is welded to the car is set up differently for different motors used in the w123 chassis so the placement of the shocks using the turbo engine carriers (alum. arms bolted to the block) won't line up in the NA chassis...... read, you may have to do some fab. to make the engine shocks work in your chassis....

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"Shabby" 1978 240D with a 300D motor
1997 Volvo 960 wagon 245K