I would like my Series III headlights to be mounted inside instead of on the fender, like the Series 2. Is this a no no in the Land Rover community?

 

Later Series 2’s also had the lights on the wings. I believe they needed to move them from the grille to the wings to meet NAS specs somewhere around 1966. I always felt that the Series 2 LR’s with the lights inboard (at the grille) were the best looking most classic LR’s ever (like my 1963).
As far as moving them inboard on a Series 3, I think you should only do it if you also use a Series 2 grille.
My 2 bits worth.

 

Just buy a Series II.

Moving headlights inboard will be considerable work, require quite a lot of parts, and the minute you look inside the cab, you'll still know it's a Series III.