ok. firstly i'd like to say i've considered this conversion as ive got a diesel lump sat in my back garden.
secondly, the TUD is not the engine to use. its a 60s designed 70s and early 80s built engine. yeah psa blah blah but at the end of the day its gotta be more modern than that. i completely agree with buying a psa engine because they're just the best at it, but you want to buy an XU series diesel engine. they have mechanical fuel injection, a better head design than the TU series (in that it has glow plugs instead of preheat chambers within the head) and readily available with turbos. As for choice, theres a rance, the XUD7 is a 1.8L N/A diesel that produces around 60bhp. the XUD9 is the most common engine, and comes as an N/A or a turb (the dTurbo engine from a 306 for example). obviously these are 8-valvers. the last choice is the most interesting i think though. the XUD11 is a 2.1L 12-valve turbodiesel. people in the "van" community push big torque through these (upwards of 500lb ft).
a couple of warnings though. the XUD engines have a cast block but an alloy head. this means if the head gasket goes (and they are old engines and likely to have LOTS of miles on them) the head itself is likely to warp. you may also struggle to fit it in a micra bay as they're bulky, and have an ioe (inlet over exhaust) manifold system (for pre-heating).
The TUD engines are commonly accepted to be the first decent drivable diesel engines on the planet, but 30-40 years on this doesnt mean that they're good. on the other hand, the XUDs are still made under license in asia, south and north america and australia. if you do want to get technical, you could go for the first electronic injection psa diesel, the DW series engines.
the DW engines were fairly short lived, although this has nothing to do with the quality of the engine. Trends moved on faster than psa expected and the need for a 2.0 (DW10) and a 2.2 (DW12). these were replaced by the fashionably small 1.4 (DV4) and 1.6 (DV6) engines found in everything across the world (including ford fiestas!
The DW series engines are strong, powerful, come available with an intercooler (top or front mount), and you can push PROPER torque from these. the standard internals will take 450lb ft, and although the clutch will die at over 250lb ft, higher capacity units are readily available (off a 307/8 or 607/8 etc. these will take 400lb ft, and the van based engines will take even more). the gearbox is built like a brick s**t house and will take whatever you throw at it torque wise, as its revs these ones don't like.
