Swapping the manual trans for the auto trans will make a difference in acceleration and add a bit of speed on the top end. The local San Antone Pick and Pull had 2 240 W123 with manual trans a few months ago - don't know if they have the trans parts since I have not out there is several months. Look around your area junk yards to see what they have.

Not much you can do to make a 240 engine run better. That said, you're engine with 500,000 miles was probably pretty tired and a fresh rebuilt engine should be a lot better.

Swapping a 300D turbo or non-turbo engine for the 240D is more than doable. Engine mounts are in the same position, trans is a different but changing is easy.

Non-turbo engine is an easier swap. You will want the complete engine and driveshaft from the 300D non-turbo since the engine is longer by one cylinder - the auto trans are the same for the '77 240 and 300. Get the 300 radiator and oil cooler (greater capapcity), air cleaner, throttle linkage, vacuum lines/connections (should be same/similar - but grab'em anyway), etc., etc.

The turbo 300D engine will also fit, but you will want the entire drive line (complete engine and everything connected to it, trans, driveshaft, rear end because turbo has different gear ratio), then you're going to need the radiator, overflow tank, oil cooler, electrical harness and glow plug relay/elec connections, AC compressor (has the Frigidaire type) and AC lines, some/all exhaust system, air cleaner, throttle linkage, vacuum lines/connections for engine and trans, etc., etc. If you have the York AC compressor on the 240 then you will need to lengthen the AC line's rubber section or get the ones from the turbo 300. A couple of members have done the turbo engine swap and can add a lot more info than I can. I just know of the differences and what you need to get (everything from the donor turbo), but have not done the swap myself.

Take pics as you go and keep us informed!

Good Luck!
Tom

__________________
America: Land of the Free!

1977 300D: 300,000+ miles

American Honda: Factory Trained Technician & Honor Grad.
Formerly:
Shop Foreman;
Technical Advisor to Am. Honda;
Supervisor of Maintenance largest tree care co. in US for offices in Tex.