By 'converted' I didn't mean that they took the carb off a 350 and then added an ip. They worked with the engine design at hand to create a diesel. In this case, the small block. It was marginal at best to be a durable compression ignition engine. There were other issues than just head gasket failures that contributed to its 'bad rap'.
In the late 70's GM was gearing towards diesels dominating their product line. Especially fullsize passenger cars. One reason, it was a way to offset the rising fuel costs during that era. Remember when diesel fuel was a LOT cheaper than gasoline? Diesels had also dominated the European car market forever, 'So why not us?'. Well, GM's attempt at a diesel market share never took off. The consumer saw to that.
When the new cars were released with the diesel engines, the public disliked them for a number of reasons. Mechanical problems, the exhaust smell, the exhaust smoke (I remember putting the car in nuetral when someone would tailgate, stomping the accelerator a couple 3 times and fogging anyone behind with black soot), the rattling, knocking engine noise, the cold weather 'no starts', etc. All characteristics that are undesirable in any automobile, let alone a top-end luxury car.
GM finally got smart and gave the diesel engine contract to the experts, Detroit Diesel, but by then the damage had already been done. They ceased production with the 350 diesel engine in passenger cars and went to the DD 6.2L, a 'true' diesel engine design, and used them in the truck lines. Like Dodge using Cummins engines.
As with anything else, todays diesels have evolved immensly thanks to advancements in technology, manufacturing processes, etc., making them a cleaner burning, quieter, more efficient, durable, powerplant.
