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I don't think it would be a problem with the low end power in the diesel. I had an 85 caprice coupe with 2.56 gears and a 700R4.
I agree the numbers work with a diesel and your trying for max mpg not towing.
A simple shift kit and perhaps redline clutched 700 is a very nice match for your issue. but beware the speed issue.
Should roll on well with grunt powered diesel idleing at 50 mph.
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