sorry for the thread hijack, does that mean you could get rid of sump oil by sticking it in your fuel tank or is there too much crap and bits in it?
if you filter it yes.. like veg oil... but a couple of points.

it's illegal as no tax on it, it'll be acidic.. it'll prolly kill your engine (much debate!)

it's known as 'black diesel'
 
I have a 200tdi in my series 2 and I did all the fitting and fabricating of it. A 300tdi could be made to fit but as it was designed for the r380 gearbox the stud pattern on the flywheel housing is complete different.

The engine mounts also are completely different. For the work and cost of fitting a 300tdi it's better to look at rebuilding the 200. If you do rebuild the engine run it as a non turbo to start with unless you buy a decent replacement turbo for it. Dont want to risk it running away again.

Search on you tube for 200tdi runaway there's a blue defender. Watch it and see if it seems similar to what happened to you. But does sound like the turbo seals went.

It's free to strip it down so I'd do that first.
 

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