I agree - If I could swap one of BMWs award winning turbo diesel engines into my 323iT, I would do it in a heartbeat. In my opinion, the E46 wagon is a perfect candidate for a diesel option. I have driven diesels for many years, VW TDis both Jetta and Passat, Peugeot 504s and 505s. I absolutely love the way a diesel sedan drives and the mileage is just fantastic. My TDi Passat was faster than the 2.0 gas an achieved close to 40MPG combined hwy and city driving with 4 people in the car and air conditioning blasting away. In my opinion BMW is missing a huge opportunity in the US by not allowing the smaller diesel engine option in the complete line of cars.
If I knew I how to get my 2000 323iT model BMW "approved", I would find a salvage model 2000 330d in Europe, have it shipped to the US, and hire a mechanic to do the swap. The only reason I have not done this is that I do not know how to get a waiver or some kind of an approval from the DMV for it to pass inspection. If BMW ever offers a 3 series wagon or sedan in the US with a diesel engine - I would be the first customer to charge down to showroom to buy one.