Yeah, if you're going to the trouble, I'd do a 2.2 for sure.  I have an
'87 Subaru 4wd wagon currently and have owned two others with 1.8
motors.  They leak oil like wasserboxers leak coolant.  It's common to
do anything from the cam seals to a complete engine reseal every 60K or
so.  I've done head gaskets on two of the three I've owned.  Granted,
it's a cheap Japanese motor, so parts are a fraction of VW costs.
Dependable too, but gutless and I can't imagine how gutless they would
be in a Vanagon.

 

Andrew

'87 Vanagon GL

'87 Subaru GL