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I don't know anything about the Volvo diesels, but when I measured up the TDI in my wife's Jetta a while back it looked a bit too wide. I think it could be done, but not without a fair amount of cutting and possibly suspension work.
Not to discourage you though... Personally I'm really tempted to do a hybrid diesel / electric conversion on mine since the engine is in need of a serious overhaul and the exhaust is falling off anyway. There looks to be enough room in the engine bay for both the electric motor and a small diesel generator (~5000W, which I'd convert to biodiesel), so it will hopefully end up being completely reversible.
http://www.motherearthnews.com/Alternative_Energy/1979_July_August/An_Amazing_75_MPG_Hybrid_Electic_Car
-aric.
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