I hate to armchair quarterback this, and I'm sure you have lots of good diesel repair people in your vicinity, but my money would be on it having severely retarded timing. VE pumps are prone to this if they have restricted fuel supply, or it might have incorrect base timing.
I would be looking at the fuel supply lines to the pump and making sure that there is 100% free flow without any restriction (save for a new fuel filter). When the filters get clogged on my VE pumped 6BT (same logic, different animal) I can feel the engine's sound change, I lose fuel pressure to the pump (BTs have an intermediate lift pump and I have a pre and post gauge) and my EGTs get out of whack. My fuel mileage also goes down the drain from about 21-22 mpg to 16. No joke, all from the timing getting sucked back.
The VE advances timing with internal fuel pressure. There are two pumps - a supply pump in the front of the pump near the pulley, and the actual rotary plunger pump (the business end). As the engine gains RPMs the internal pressure rises due to the frotn pump spinning faster, which pushes on a piston in the bottom of the pump, that rotates the entire fueling rack and advances the timing. When the fuel supply is inadequate or otherwise restricted, the pump starves, and cannot develop sufficient pressure, which prevents the timing from being advanced. Retarded temps result in high cyl head temperatures, high exhaust temps, low cylinder pressures, low power, and lots of energy being transferred into the cooling jackets and not used for locomotion.
I also have VE timing tools that I can send you shipping collect and you just send them back to me when you are done, to set base timing. I won't need them until later this summer. I bought them off Ebay and they are cheap chinese crap but they work reasonably well for setting base timing (nothing more than a dial indicator and some specialized adapters). Setting base timing would take that whole possibility out of the equation. Since I think you have two of these, it might make sense to get your own tools. Of course, there is always the unscientific "advance it until it sounds like a can of marbles and back of a smidge", probably better left to cast iron dinosaurs like by BT.
Best of luck. What has been done to the trans to make it happy behind the TDI?