Have you thought about doing a 4.0 swap?
You can get a 4.0 from a newer Jeep and it will bolt in without too much problem. Used XJs are all over the place and they're cheap. You can pick one up and take the entire powertrain and wiring harness intact.
With a 4.0 swap, you can pretty much bolt it in with no need for fabrication. It uses the same motor mounts and
Transmission bellhousing. It will connect to the factory radiator and use the same shroud for the fan.
Modifying a wiring harness isn't as hard as you think it might be. You just have to spend a lot of time and pay attention to the detail but it's not rocket science. It's only intimidating until you do it once.
It would be easy to bolt the 4.0 to the 904 and it will hold up fine. The only thing you would have to worry about is the crank position sensor. A machine shop can set up your
Transmission bellhousing to hold the sensor.
For the 4.0, the speed sensor in the
Transfer Case tailhousing is there to control the automatic
Transmission . If you get a 4.0 out of a manual
Transmission Jeep, you won't have to worry about that to run it with the 904. If you get an automatic equipped 4.0, you have to reprogram the computer but that's pretty easy.
As far as gauges, you could still run the stock speedometer and fuel gauge and volt meter with no modifications. A tach will connect to the coil wire easily. The oil pressure sender may need to share the port with the computer's sender but that's not much more than bolting on a brass T fitting. There may or may not be a convenient place to drop in the temp sender but that's easy to get figured out one way or another.
The only easier upgrade would be a Howell style throttle body fuel injection system that's set up to go right on your
AMC 258 i6 / 4.2l .
A V8 conversion is not terribly challenging. There's more aftermarket support for the Chevy V8 though Ford and Dodge conversions aren't too difficult. One other option is to put a throttle body system on an AMC V8. A
AMC 304 with a Howell throttle body would be a pretty easy bolt in. You can get V8 motor mounts and bolt the 904 right to the engine with no adapters. It will hold up just fine.