The stretch bolts are required to keep the head gasket intact -- the aluminum "grows" considerably more than the steel bolts, so if the head bolts don't stretch and remain elastic, the head gasket will get overcrushed and then leak when cold.

The only modifications you are going to be able to do without getting new pistons custom made for you (they are die cast, by the way, not machined, so you can figure the cost for custom ones!!!) are to install an intercooler and raise the boost. Propane injection and low compression/high boost are out of the question for this engine, they will require modifications you won't want to pay for (and I have questions on the safety of propane injection on prechamber diesels anyway).

The reason you can screw so much hp so easily from US made pickup truck engines is that they are seriously de-tuned to reduce the hp output to save the featherweight drivelines -- the 5.9L Cummins is rated for at least twice the hp in medium truck applications. This is not true for the MB diesels in cars -- they are designed to a different philosophy, and sacrifice raw hp for much higher rev limits, much better milage and less maintenance. My 300TE get 19 mpg in town, 22 on the highway, the 300D gets 30 in town and 32 on the highway with the same performance.

I'd stick with a plain jane rebuild since you are looking at nearly $5000 in parts anyway (plus 50 hrs book time) unless you can save the pistons. If you want a screamer, buy a gas engine, it's cheaper, easier, and much more effective

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1972 220D ?? miles
1988 300E 200,012
1987 300D Turbo killed 9/25/07, 275,000 miles
1985 Volvo 740 GLE Turobodiesel 218,000
1972 280 SE 4.5 165, 000 - It runs!