I've had a few idle thoughts as to whether a diesel 240 bellhousing would mate up to the really neat VW Vr6 engine.

As for diesel technology, probably the VW TDi engines are about as good as you can get. Not a lot of HP but that's just because they don't (like any diesel) rev high - 90 HP and 150 ft lbs in stock trim. In a somewhat heavier Jetta body they get 40 mpg city, 50 highway. And a chip here and a new set of injectors there and you can bump that power up to 150 - 180 hp and 200 - 300 ft lbs of torque.

As for burning cooking fat in disels - we used to do that 20 years ago in my Dad's diesel 1965-ish Land Rover. We never converted or added chemicals to the oil - just filtered it 3 or 4 different ways to catch all the fine particles and poured it straight in. The catch was that in cold weather it could gel and immobilize the Landy until warmer weather. I think some bio-diesel kits get around this problem by having a small 'regular' diesel tank that you start up on as well as shut off on (purging the injection system of the oil) - and the main tank and fuel lines are heated with engine coolant. In our case, however, we just poured it straight in after the filtering. It seemed to reduce the clatter slightly, hard to tell on a 2.5 liter disel Landy (LWB pickup) but it had at least as much power, possibly a little more. And the exhaust smell was more pleasant - actually a faint whiff of frying food instead of the harsher diesel smell. Really not any drawbacks to think of - restaurants seemed happy enough to give us as much oil as we wanted, the filtering wasn't much of a problem, and the Land Rover seemed perfectly happy with no problems (err - other than ones endemic to old British cars - flaky electrical systems, fawlty hydraulics).