Charles, a used diesel that hasn't been rebuilt is still an unknown factor. How willing is the mechanic to warranty it? How available is he to come and work on it, if there is a problem?
It does seem marginal on the horsepower, but then again diesels and gas engines have different torque curves as well--so the hp isn't effectively the same. (Well, it is, but the torque makes a difference.) I'm not sure that you wouldn't also need to change the transmission in order to run the diesel at the right speed as well.
If fuel stowage and pricing isn't an issue, a properly rebuilt A4 should be a perfectly serviceable and good powerplant. It isn't unreliable because it is an A4, or because it is a gasoline engine. It is an OLD engine, and that's a problem no matter what the fuel is. Two grand wouldn't be bad, for a complete rebuild, if it was done properly with no corners cut.