1 - yes
2 - Old Seatbelts are ideal
3 - biggest advantage (or disadvantage, depending on how you see it) is that the M151 has Independant suspension, MB and M38 have live/solid axles. however that means you cannot make major changes to ride height etc without spending some serous cash and sourcing rare/custom parts.
As for the diesel conversion, i'd suggest a light engine due to the fact that these vehicles were pretty light as well and therefore a 2.0D rolla engine is ideal. I have the same engne in my CJ and it has more than enough tpower for "real" offroading without al the wheelspin which you get with larger turbop diesel applications.
This is ust my opinion and i'm sure many "hardcore" offroaders woud disagree since they like more power.