No compatibility problems, I don't think D-Jet is so precisely tunes as to notice the difference in compression ratio. You may need to retard timing slightly, however. Relying on a canned timing setting, however, doesn't make much sense with all the factors (actual compression ration, air fuel ratio, distributor curve after 30+ years, local fuel octance rating, altitude, air temp, thermostat, etc) that vary from car to car. Just advance it until the idel slows, then back off slightly. Then drive it around with the engine fully warm and carefully listen for pinging. An occasional ping every once in a while is just about right. Too much and you should retard it a little.

As for putting a new head on a 103XXX mile bottom end - shouldn't be much of a problem. Of course, mileage may vary, it depends on the maintenance the engine has recieved up to now. With the head off you can get a good idea of how much wear there is in the cylinders. And even before that an oil pressure gauge is pretty indicative of the condition of the bottom end.

One thing to consider while the head is off - replacing the cam, lifters, and fiber cam gear. Cams don't last as long as the rest of the engine, and replacing one involves taking off the head to replace the lifters (don't reuse old lifters on a new cam, unless you enjoyed the process of swapping the cam so much you want to do it again in the near future).