In effect, you are going to improve the breathing capability of your Jeep. Will it improve performance? Marginally perhaps. Butttttttttttttt......why bother? May be worth trying on a modern common-rail but an '89 540? IMO, that money will be better spent on refurb'ing or making her a better offroader.
Also, I have to take so much care with the K&N in my Vtec (during the monsoons, catches dust so easily etc. etc.); the last thing I'd want while offroading is to worry about a damn filter sucking in water.
For reference :
Linky (Sports exhaust for a diesel)