One more thing: around here turbos are worth approx *double* the price 
of regular diesels, and quite hard to find.
If he won't warranty the whole engine, see if he will cover the basic 
parts minus the turbo and injection pump. Although very few internal 
parts are the same, he is unlikely to know this, and it might cover 
you for a head gasket failure or something similar.

Shawn & Janis Wright
'88 Westy (336k)
'85 Jetta TD (359k)