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Mcduck is exactly right- use the crank sensor and bracket off your 940 engine. The plug on the LH2.2 (or earlier) 240 dist is not connected for this application. You're just using the dist as a rotor and cap. Note that timing can not be affected by turning the dist! The timing is fixed by the crank sensor in your 940.
You need the 240 type cam plug for the back of the head. Actually I assume the engine already has it. Make sure it's in good shape. Makes a mess if it ever comes out.
You'll also find, since again I am assuming that your donor engine is 1988 or older, that you need to change one or two sensors on the head. Look at the plugs on your 940 engine; swap any of the sensors below the intake that are different. I know for a fact that the fuel injection temp sensor is different. I crossed the LH2.2 to LH2.4 barrier last year, installing a 1989 240 engine (LH 2.4) into a 1988 740GLE (LH2.2), and other than the dist drive it was pretty trivial.
YOu'll of course find the obvious external differences- the 7/9 mounts are totally different from 240 so you need to swap mount brackets. The accessory brackets just swap over so you can install the PS pump and alternator in the correct 940 locations.
I would of course service all the gaskets (including rear main) while you have the engine out. Oh yah- important to note, you MUST save your flywheel from the 940. The older car does not have the windows on the flywheel to run the crank sensor. Position both engines at top dead center (TDC) before swapping flywheels. The orientation of the flywheel is IMPORTANT, and not obvious, and not easy to figure out. Mark something on it with white-out or something so you can double-check the orientation when it's swapped. You do NOT want to pull the engine twice.
Also note that you may well find it easier to pull the engine and trans as a unit, and separate them on the ground. Your choice really but if you're doing it in the driveway, this will probably prove easier. Have extra pairs of hands to keep things like the dipstick tube out of trouble on the firewall.
Good luck with the project!
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