My '85 (617 engine) takes a long filter and my '87 (603 engine) takes a very similar looking but shorter filter. Are you sure the filter you took out was the right one? In your engine the filter should fill the entire filter housing with the top of the filter near the top of the housing when it is properly in place. If you had an inch or so "space" at the top with your old filter you had the wrong filter. It may be that the PO replaced the filter with the wrong type! Unless you have some wierd engine variant the longer filter common to all the 5 cylinder diesels should fit your car.

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LRG
1987 300D Turbo 175K
2006 Toyota Prius, efficent but no soul
1985 300 TDT(130K miles of trouble free motoring)now sold