Fazalaliadil, I'm on the same path as you. We have the same issue.
I have
the very same engine in my 1970 CJ-4 that has been fitted for more than 11 years now.
As far as the engine is concerned, I would describe it as bulletproof. Mine was imported from Germany with 48.000kms so now it has around 100.000kms. In off road terms and conditions it is a respectful number given the fact that it doesn't smoke or burn oil like many diesels do. In the past we didn't have any problems because it is properly maintained by changing the oil and filters regularly. If you do this (and I believe you do) you shouldn't be worried.
The more interesting part is mating the engine to the transmission. This is what gives a big headache. I have mated it to the original T-90 with a connector plate. It has some vibration which cannot be avoided but the real problem is the top speed. 3 speed for a lower RPM diesel are just not enough.
-I think that the best option is to go with the KMT-90 as it would fit this engine perfectly. Also the CJ3B is relatively light and would make a proper power plant and in the same time be cost effective.
As my T-90 is dead, I have already arranged to get a KMT-90 from Germany and I'm expecting to get it by next week. Follow the link for more info about this topic.
Here is some info about the modifications which are needed to fit the engine on the chassis is mate it to the transmission. Some of the stuff we have done, and some would need completing in order to fit the KMT-90 on my Mahindra properly.
1. The oil sump is on the way of the front prop shaft. That will need cutting and reducing the oil quantity by 300-400 grams. This is not a problem and would not harm the engine.
2. You will need to weld plates on the chassis for the engine to be bolted. Stick with the original engine holders. If you want, I can take photos of how mine are welded and placed.
3. The engine is missing the choke cable which runs from the fuel pump to the engine head.
4. As SpikeArrestor suggested, you would probably need to push the center crossmember back in order to accomodate the slightly longer assembly.
4a. This would cause lengthening or shortening of the prop shafts.
5. I still don't know for sure if the handbrake assy from the T-90 would work with the KMT-90. Rest a savoir
6. Make sure that you use the bell housing from the KMT-90. The original one is too tight for the clutch pressure plate.
(I had the same pressure plate, brand new fitted to the engine when it left Germany. I gave it away because I didn't think it would need us. Now I'll see if my friend would return me one as he owes it me).
7. You can use the original mercury (Hg) meter, just hook it up on the original place on the engine.
8. There is lot of space under the hood so height is not an issue.
I believe that you're familiar with most of the stuff because I've seen your projects and I'm always astonished by the level of finish.
This is my rig. Excuse the dirt, it has never been washed. Seriously.
If you need more info I'd be glad to help