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I am that someone from SBO!.
To be clear, I didn't say it should be water-cooled. What I did say was Volkswagen added the diesel and a water-cooled option (and later discontinued the air-cooled engine) for a reason. In fact, you would have some fabricating to do to convert it to a water-cooler.
Volkswagen switched from a Type 1 engine to a Type 4 engine on the Type 2's in the early 1970's. The Vanagon is bigger, heavier and geared differently than its predecessor reagardless if it is a pick-up, transporter, or pop-top. The Type 4 engine did not last long as the sole powerplant (1980-81 only).
And this Type 4 engine has nuances differing from other Type 4 engines. Volkswagen eventually gave up on it. Aftermarket people interested in creating an air-cooled solution for early Vanagons gave up on it.
The above are the facts, not opinions.
Any Type 1 engine installed into one should be considered a disposable engine. That's all I am saying. You are certainly free to give whatever you wish a try. And I hope for your sake if you do, I'm wrong. But I doubt it.
My suggestion at SBO! was to find a proper Type 4 engine from an air-cooled Vanagon and having it rebuilt to specs. It would at least still be the correct engine mated to a transmission designed for it.
If you were to go to a swap involving a radiator, there are options. None of them, however, avoid being costly up front. The venerable 1.6 liter diesel that was introduced to the Vanagon line in 1982 will give slow a whole new meaning.
Then there is the collectability factor. Single- and double-cab Vanagons (Type 25s wlsewhere) are highly sought after. Converting an '81 to water-cooled would hurt its value on the open market if that is a concern to you.
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