If originality is important to you, then I think you should buy an original car with original size engine.....
I've fitted 1600 and 1800 cc. engine to 124 Coupes/Spiders - and had clearance problems due to the increased engine height (the cylinder blocks on 1600, 1800 and 2000 engine are taller than on the 1438 (this block was based on the 124 saloon/sedan of 1197 and 1438cc).
If you strip a 1438 engine and compare it with a 1600,1800 or 2000 engine you'll see that the crankshaft and con-rods are smaller/lighter on the 1438cc. So the 2000 engine is both taller and heavier.
In contemporary road tests, it was noted that the 1438 engine was 'sweeter' and nicer to use than the later larger capacity engined cars. The original early 1438 cars had, as you say, a torque tube connected to the rear axle, driving the rear wheels. Some say this gave better handling but iirc had a tendency for the rear of the car to lift under heavy acceleration. It wasn't used for long before being replaced with a 4 link axle plus Panhard Rod as used on all subsequent models, regardless of engine capacity.
Bear in mind that should you need spares for a torque-tube axle, there might be difficulty in obtaining them as this axle type was only used for a short period of time. (I had a torque-tube plus rear axle for 25 years until my last house move, couldn't even give it away, so it got scrapped!). Iirc, this model also had a rear anti-roll bar fitted (deleted from later axle types).
If you do decide to buy this car fitted with a 2000 engine, one point you might watch out for is that the taller engine's cylinder is not touching the brake pipe feeding the rear brakes - you'd need to use an inspection camera or mirror + lamp to check this out. You don't say if the car in question is right or left hand drive, but I fitted a 1608cc engine to a 1438 RHD car and the cylinder head almost wore through the rear brake pipe (on RHD cars it runs across the bulkhead then turns to follow the gearbox tunnel and onto the rear brakes) Just caught it in time, as the early cars had only single circuit brakes, failure of this (or any pipe) would have resulted in total brake failure.
These cars can be converted to dual circuit brakes using the later type dual master cylinder plus some possible re-doing of brake pipes.
Also, check out the front suspension very carefully, especially looking for cracks on the front engine/suspension crossmember in the vicinity of where the lower suspension wishbones/arms are attached, also around the upper mounting which is bolted through the chassis rail on both sides. Later crossmembers were improved a little in these areas but could still have problems if the bolts/nuts are not kept tight or if involved in a collision e.g. with a kerb.
Beware any car that has impact damage to the engine oil sump/pan, if this is pushed upwards to any degree, it can close off the oil intake to the pump or indeed fracture the oil pump intake horn.
Hth, (see my signature
)
Al.
