Well, thanks to everyone's input and a lot more research, I have decided against the diesel conversion.
Now that I have decided against this I would like to get my engine more healthy and capable for my setup. I recently upgraded to 33x12.50 from 32X11.50 tires and added a front bumper, winch, and rear bumper. When I loaded my jeep up to go camping a few weeks ago, it started smoking real bad heading up I-70. Noticed it was just an oil leak, so I headed back home. Spent the weekend tracing the oil leak and replaced the oil filter housing seal, distributor seal, valve cover gasket, rear main seal and oil pan gasket. Not really sure what else it would be, but the leak is still there. It only is noticeable when I get on it a lot or when I am under heavy load. I drove it twice the other week 30 miles each day and it didn't do it once. Then today I drove it 20 miles and it started leaking and smoking (burning on exhaust). The only thing I could think of was because I had the AC on today and usually I do not have it on. Ac was also blowing fine until I punched the gas or was on the highway, then it would make a light whining sound and blow half as hard. Engine was also seeming kinda sluggish, like it doesn't have as much power since it stared leaking. Engine temp and oil pressure seem fine. I doubt it was just adding the tires and extra metal. I have the Chrysler 8.25 29 spline in the rear with a powertrax no slip "locker" and I believe stock gears. From what I have read the 8.25 29 spline should handle the 33" tires no problem. I would assume that it is just a seal in the engine since it has 125k on it.
At this point I am interested in finding a local shop that does great work on jeeps/4wd. Since I have the budget from the projected diesel swap, I would like to rebuild my engine and turn it into the 4.7 stroker. I know it is the opposite of the better MPG diesel I was looking for, but I believe I should be able to get the power I need, a healthy rebuilt motor and slightly better MPG with a proper tune.
Any advice, recommendations or thoughts would be appreciated.