I can't think of any good reason to put a diesel engine in an X1/9!
But....
The BMW 123d motor is a good diesel motor, especially in D3 Alpina spec, and also when remapped to about 240BHP. From another angle I ran a Leon 1.9 Diesel in Cupra R spec with about 210BHP and that was an excellent car.
But the X1/9 is a different animal and doesn't want the characteristics of a diesel motor. If I was going to put an engine of choice in an X1/9 then, if a Judd motor was ruled out, I would really fancy the Audi V8 in 420BHP spec, as per the RS4. This is a fantastic, characterful engine with great delivery through the range and really enjoyable to drive. It would be great to graft this drivetrain into the X.
I had an involvement with Ultima and always thought that car would be better suited to a higher reving nature engine, such as the Audi motor. Having experience in these cars with Iron block Chevy V8 and all alloy 7500rpm redline V8s I reckon the 8K2 limit of the Audi would be a real winner. And 420BHP would be enough for some fun. Though I have to say these cars with around 600BHP are quite intoxicating!
But power is not everything and I think if you pulled the motor out of my 100HP Panda that, with a better cam and flowing would be a cracker of a motor in the X1/9, if you take the weight down to about 750Kg.
MC