My 88 Max has the Starquest engine and turbo. I bought it turn key and recently smogged in Spring 2011. After driving my NA 2.6L Raider, the turbo was like a clean, shiny day after living in LA smog, my goodness. The gent that built the truck up only addressed the power plant, transmission with Starion gear sets, and bigger stainless exhaust. The AC was retained and converted to R134, negating use of the stock intercooler. I am in the process of fixing up my truck again, following a headgasket issue. The mileage I had over 10k miles was about 18 mpg, about what the NA engine returned but gangs more fun.

As to a diesel swap, why not consider a Mitsubishi TD? This is all relatively bolt in stuff, unlike the Cummins.