Diesel, "oxygenated???? The ARB hasn't asked for that.

Yes, CA did remove the sulfur but that's all that's been done.

As to "tuning" a diesel .... leave it at the M-B spec. It produces about
 40HP/liter which was the norm for its time - gas or diesel. Some years
ago I replaced my 300SD's injection nozzles with Bosch remanufactured
one and the motor is smoother, quieter and smokes less.

Some have raised the boost level from the 11 psi spec to 13 or 14 psi
and claimed more power but the motor is already 20 years old and I'd not
stretch its capabilities unless you're willing to undertake an overhaul.

No '07 passenger car diesels are being sold in CA so we should be happy
to drive these old rattlers. Next year a Bluetec M-B diesel is promised:
V-6, turbo, catalysts and urea exhaust injection (to reduce NO
emission). Complicated but uses about 1/3 less fuel than the comparable
M-B 3.5L gas V-6. This new motor makes about 70-75 HP/liter, as do
contemporary gas engines.