To answer some of the questions and clarify a few things, I'm considering this for a D2/D4 style pony motor. The one I have appears to have a cracked block or something. It's getting combustion into the water jacket and then pushes water out the radiator. These old engines are expensive to rebuild and from what I've gathered can be rather temperamental. My book lists a D2 pony as 10 HP @ 3000 rpm. That's 17.5 lb-ft of torque, not out of range with what you could find on a modern gasoline engine.
To answer NCWaynes question, you must be referring to the pony engines on larger Cats. The D2/D4 pony engines have a gear directly attached to the crankshaft that spin the idler gear which spins the pinion shaft. That is where the clutch and throwout mechanism is located that engages the diesel flywheel. So by mounting another engine with a gear on it to drive the idler you accomplish the same principal as the original design.