If your after power the diesel is not the way to go.

I'm building a preformance 4.0 Gems motor and it will end up costing 9k to 11k but I'm not using my motor in my truck andthe motor alone was4k.

 

So, just to get it straight in my head, the small block chevy would beused for a sheer power upgrade and the diesel would be an economical upgrade?

 

Kinda, yes. The 350 would get you raw power, the diesel would give you fuel economy and low end tourqe for off-roading.
You can buy a 350 for next to nothing, but what are all the conversion kits going to cost you? Plus the extra weight of a cast iron big block. A four or five cylinder diesel will weigh about the same as the 4.0 and get you close to 30mpg on the expressway where the 350 will get you maybe 15 on the expressway.
Parts for a 350 are cheap as dirt and they are easy to work on, just like the 4.0. The diesel will be more reliable and you can use bio-diesel.
The 350 you have to change the transmission, t-case and beef up the axles. The diesel all you need to do is buy a adapter plate so that you can mate the engine to your current transmission.
Either way you will need a new ECU.

 

I looked at the Dicotech tdi conversion, and it seemed like a ton of alterations. Does the disco have to be a manual or do they have autos? I guess this is something to think about as most of the D1s and D2 are getting up there, mileage wise.