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I'm not familiar with any head problems. The FWD models have their own idiosyncrasies just like the RWD models. There's a lot of information on the AWD/FWD forum detailing it.
I've found my 850 to superior in stiffness, quickness, comfort and handling compared to any 4cyl RWD I've been in. The 5cyl is not as smooth as the six in your 965, but it is a derivative of the same engine. Very basically, it's the same engine with a cylinder lopped off the end, turned sideways. The timing belt job is a bit more challenging than on your 960 (it doesn't get any easier than the 960). The plus side is that the back of the head is a whole lot easier to access.
What have I done? I've enjoyed it, immensely. I've also since bought a 240. The FWD cars do seem to lack the "soul" that a 240 has, if that means anything to you.
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850 / 240 / Mini
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