You did not mention the engine. Alright it is a a 4.2 Diesel but is it an HZ or HD?
In terms of running costs 1KZ and 1HZ/1HD should deliver similar figures....and we all know the TLCs are exceptionally well built, if you sort out the issues(which I suppose a 20 year old vehicle will have) it will serve you well for many more years.
Regarding the body swap...:S I am not sure bout the legalities....I think it should not be a problem where you live, but in Punjab the authorities have a habit of making something out nothing....so you need to check that out with excise, custom and police departments ideally.
For 1.2 million you won't find a decent car, and as you mentioned that this vehicle is in top order, its a deal not miss.