I see what you saying as for the BTU produced, but like you said...if you make it for free versus paying 3.75/gal at the pump I would far rather do a fuel replacement. Any type of ICE is a glorified heat pump and the only way to make that pump work is to create heat and the only way to do that is to burn something, so no matter what you'll have to have a fuel of some sort. If you can make it for free then do it that way, then the only costs you'll have will be your maintenance.
Is there a way to delay injection time on some of the older diesels? Or even the new ones? Ignition timing will still be a problem even for a diesel, granted that ignition timing is controlled by your fuel injection. That is probably why you had such bad vibration when you did it the first time. If there is some way to inject the fuel after TDC I'm willing to bet money that you would have a much smoother running engine. If I'm correct, I think that the fuel pumps are gear driven, if nothing else you might be able to remove the pump and reinstall it off one tooth to see how it runs. Like I said before I have never worked on diesels even though I have owned one so I'm not sure if that would actually work.