Malc -- Yes, fun is one of the keys.
I guess I'd rather enjoy doing such a project using the M130 engine. Years ago I saw a W113 that had the engine, transmission, etc. replaced with new BMW bits. Somehow it just didn't seem right to me, although I'll wager it worked just hunky-dory.
The good news is that I already have a spare engine. Anything original that has come off my car (which at this point is not very much) I've stored away for posterity. The idea here is that return to fully original configuration would not be particularly difficult if that desire ever strikes.
But what you suggest sure makes sense. In fact that's more or less what some of those ex-AMG guys at Mechatronik are doing, meaning putting a 320 engine in W113s (or as they called it, "MSL"):
http://www.mechatronik-gmbh.de/english/e_msl.htmlIf you haven't already looked at their video clips of that blue W113 / MSL I'd recommend it. Clearly not for the purist, but definitely in the "fun" category.