Thanks for the kind words and appreciation...and nice to know that you are planing a restoration on a 40...
Coming to the engine, honestly in this time and age 1KZ will suit you as a good HZ will cost around 400K to buy.
If you compare the numbers(Horse power and Torque) of KZ and HZ you will find no difference, just the fact that HZ achieves those numbers easily than a KZ. KZ, I have heard is heavier on fuel compared to HZ but the price difference does not justify the extra one and a half kilometer per liter that an HZ will deliver.
Recently I was in Pindi and in conversation with Farooq Awan(the guy who built my rig), who was in process of rebuilding an FJ40 with 1KZ told me that the combination of 1KZ with H55F gear box and 9.37 diffs is amazing. I will recommend that if you do restore a 40 go for this combo. Or may be a B series engine....
A good 1HZ, the kind of engine I have in my 40 is insanely expensive these days.