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240D I *think* would physically be too long (in line 6), they are not as good an engine as the 4 cylinder, though maybe the transmission would fit to the 4?
The concern is not really the transmission, it is the final drive (rear end) ratio. Top gear in most automotive transmissions is 1:1 (unless you are into a 5/6 speed overdrive and big bucks), so you have to pick an engine that works with the rear end ratio you have, or is available. You have to match engine rpm directly to top speed (as the transmission is 1:1) . This is why for a light automotive application you are aiming towards an engine that revs to around 3200-3600. This puts a bit of a damper on engines that will "work".
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