Posted 06 November 2009 - 10:27 AM
Since you are thinking of starting this project fairly quickly - your best bet, if looking at a diesel power plant is to drop in the VW engine and go from there. As Bitter mentioned, diesel engined Toyotas, were not a big hit in the US - but were very popular overseas, where diesel sells at a fraction of the cost of gasoline. Trying to source a decent one diesel in good shape, quickly, from a vendor overseas will be quite difficult. Not to mention, emissions/legality issues with the swap, depending on your area. The VW diesel is easier to source and there would be a plethora of readily available parts, should something pop up.
That doesn't mean that the standard gas engines are poor in comparison. Diesels are very efficient and near bulletproof in design, but they are considerably heavier than their gasoline counterparts. A good condition 7A-FE with a 5-speed in the Corolla may get you high 30s maybe even low 40s MPG - if you drive conservatively on the highway. The newer 1.8L 1ZZ-FE engines might also be a possibility. Also readily available, the 2000+ models have variable valve timing for better efficiency and the 7th generation Corolla shares very similar dimensions with the 8th gen Corolla.
Wiring would be the real headache with any swap - having a donor car right there can save lots of time and energy. Just strip off the bits you need and part out the rest of the donor, or sell for scrap.
In my old commute, I would cover about 1000 miles a week (now 500 miles a week), in my 2002 Corolla with 4-speed automatic, my average fuel economy was right around 36-38MPG consistently. This is in DC Metro rush hour traffic as well. Road trips, I could easily hit low 40s MPG. Worst tank was 30MPG, best tank was 47MPG. I had considered a diesel and hybrid before I got the car - but given the unknown availability of diesel fuel in areas around me and since my commute was almost entirely highway - a fuel efficient gasoline engine was the most flexible option.
Since you mentioned that fabrication is not an issue - there are other options for increasing fuel economy. Instead of concentrating on the engine, you could try some aero mods. Boattails and skirted wheels, look odd, but have been proven to vastly increase fuel economy. Reducing overall mass of the vehicle is another easy way to increase performance and fuel economy. Just think how the car would handle and perform if you cut the car's weight by 500lbs. The gains would be huge.