I was thinking about such a conversion myself.

Obviously, you need to find one of the mid 1980s deisel 240s. There was a 'Rolling' article late last year/early this year that discussed the history of deisel volvos. As opposed to developing one for themselves, Volvo simply used a VW deisel engine in the 1980s models. A good bet too because regular gas prices fell and deseil prices rose. I'd guess that deisel VWs are probably a bit more plentiful and you'd have the same motor.

Anyway, putting such a motor in is likely as difficult as installing a B21 or B23 motor into a 122. I've never seen one of these desel motors up close, so I can only guess. But I'd guess that it can be done, but might get a bit "complex."

If you google for volvo amazons you'll run across a story about this swedish guy who got an Amazon from his old girlfriend. It yellow and has some weirdness with the front grill. He upped the motor several times before installing a B21. When last he updated the site he said that he was confused about all the vacuum lines and was now working on another project. He has many pics of what changes he was making to acomodate the motor. Those pics should probably be looked at. I think it required cutting back the inner fender walls and opening up the front.

There would be some minor engineering challenges with the dual gas tanks and the biodeisel heater, but getting the motor shoe-horned into the engine compartment is your biggest challenge.

Still, I'm sure it is quite possible, especially if you have garage space, welding skills, and teh other tools to do most of it yourself. Let us know. I'm quite interested it this myself.