Seeking advice/guidance for xk8 engine repair or replacement

Have recontly happened across a 1998 XK8 Coupe witha sick engine. Right sided head gasket is going to need to be changes. I also plan to rebuild cooling system and bring timin chains a guides to post 2002 sarrasy.
Considering all this I have located a 2002 refurbished engine and will probably go that route. I am also wondering if we can upgrade to a 4.2 liter engine
Alternatively we can do th ew headgasket, etc here. My Jaguar partner for life and I have done over 25 Jaguar restorations but nothing newer than 1990.
Given all these alternative which route would yield the best result without adding much complexity to refitting entire engine. Tholughts>

SEF
1967 E type coupe
1990 XJS ots
1996 XJ12
1998 XK8 coupe

Note that a '98 to '02 is not an exact 1 for 1 swap. The '98 is an AJ26, and the '02 is an AJ27 engine. They are both 4.0, and they are mostly similar, but there are also some differences.

To go to a 4.2, check out this link for a nice summary of considerations: http://www.jaguarforums.com/forum/jaguar-engines-transmissions-47/quick-reference-swap-your-4-0-block-4-2-a-23763/

-Steve