If you really want a diesel, then consider the Jeep Liberty with VM Motori 2.8L four cylinder
diesel. It's available for less than $14K with fewer than 50K miles, and it has some aftermarket
support. Add a small lift, some taller tires and a winch, and you can go 95% of the places a
built Wrangler could go.
The diesel Liberty had lots of problems, mostly with MAP, EGR and transmission, and repairing
these under warranty cost Chrysler a bundle. Most of the problems are well known now, and
fixes are available. See
http://www.lostjeeps.com/forum/phpBB3/viewtopic.php?f=5&t=50930
Here is a photo of forum member bugnout's Liberty
and here is tommudd's Liberty
Edit: tommudd's posted a list of mods for the vehicle above
Do you have skids ? I would start there for sure.
Then OME LIFT, I have installed over a dozen on KJs now with no problems, you will get between 2.25 and 3.5 inches of lift depending on what you want to add. It will be a better DD after the lift than it is now. Will handle better for sure.
OME 927 front springs
OME 947 rear springs
Teraflex extended bumpstops for the front
2 hockey pucks per side in the rear for bumpstops
I have used Rancho RSX shocks front and rear 17004 for the rear, 17505 for the front, they stopped making them but there are still some out there at Summit racing and JeepinbyAl. These are great for the KJ.
My first lift was the above set up and lasted 100,000 miles , switched it out for OMEs/ Ranchos again for the next 100,000
Good size tire with the above is the 245-75-16s, would not have to regear but you can go to 265-75-16s which I have done. Need 4.10s with the 265-75s though to regain power and mileage