While this can be done, the problem you have is that the Discovery is full
time four wheel drive, where the S3 is part time four wheel drive - and the
S3 gearbox will not stand the tdi engine for very long. So you have the
choices (for a satisfactory result) of either:-

1. Modify the Disco transfer case to part time four wheel drive - probably
expensive and a fair bit of research, but perhaps the best solution.

2. Modify the S3 front axle to take CV joints instead of the cross and
bearing U-Joints - expensive, but I think there is a kit.

3. Fit the Discovery axles to the S3 - rear no problems, but there are
issues with the track rod interfering with the springs - cheapest, and been
done quite often, but some of them look pretty crude.

As you can see the engine mounts are the least of your problems! (I think
theyare the same position on the Series/200tdi but not the 300tdi) Then
yoou have to fit the intercooler and radiator, but this is relatively
minor.
JD

Apart from the obvious problem of different 4wd types, you will shag the S3 gearbox in 5 seconds!!!! They
can't really take the S3 engine let alone a turbo diesel!!!

Nige

Using the SIII box it goes pretty much straight in. As I recall you
have to use the mountings and mouting brackets off the SIII engine -
they just bolt on in place of the Discovery ones. There's a bit of
plumbing needed beacuse of the switch to diesel, but that was about
it - a couple (I seem to recall one actually) of bolts don't line
up on the bell housing but that's not a problem.

You'll have to watch your right foot, or get a good stock of half
shafts in!

Richard