[Christ]

I aint lifting it any inches, if I do it'll be maybe 2'' of under strut lift to clear slightly larger tires for fun time.

I also need to sit down and compare the gearing in the OE auto trans to figure out if it'll even run the diesel appropriately.

VW Diesel engines aren't that much heavier than any other 4 cylinder... I think the 1.6 is like 300lb, and it'd be sitting at 50* orientation instead of straight up and down [like you'd see it in a Vanagon where the owner still wanted to close the engine lid.]

The OE head gaskets fail. Aftermarket ones have been redesigned to negate the failure point. It's nothing to do with the engine, Subaru blames people using the wrong type of coolant or mixing coolant types, the revised HG PN is supposed to allow better cooling flow through the rearmost corners of the heads, where the gaskets tend to fail.

Odds are, the mechanic that did your friend's head gaskets didn't flush the cooling system while he was working.