What exactly is wrong with the engine?

You will find that rebuilding or replacing the engine is an expensive proposition, used engines generally run about 4k.

Welcome and if you have not already done so read Sir Sams NOOB guide. As to the engine absent a timing belt failure or a lubrication failure, both of which can cause catastropic engine failure, these engines are pretty solid. That said there are lots of little things that can cause the vehicle to not run well which have nothing to do with the need for an engine rebuild. Depending on your location there may be a forum member in your vicinity to chat with. Other than that how many miles does the vehicle have on it. If near 100,000 or somewhat over the timing belt needs changing if it has not already been done. Over 100,000 without changing the TB is definitly not good but if the belt has not failed or jumped a tooth, see above, all that means is you need to change the TB immediately. Of course flushing incorrect coolant, engine oil, tranny fluid, etc may be needed but none that means and engine rebuild is necessary.

Sir Sam has a lot of experience with timing belt issue but what you describe sounds like it may be a fuel delivery problem such as a clogged fuel filter or air in the fuel filter head. The fixes are a new filter and/or bleeding the air out of the filter head. Try pumping the primer bulb on the filter head if it's really soft & doesn't pump hard quickly there is a lot of air in the system which has to be vented thru the bleed valve on the opposite side of the filter head and if there is enough air in the system it may have gotten into the fuel rail which takes a long time to purge the air. Did the filter head have a bright blue electrical plug on the driver's side, if not it's a 1st gen head and they are very prone to air problems. You might also want to discuss this with Keith at Green Diesel (http://www.greendieselengineering.com/g ... ethod=home) as he knows a ton about these motors and is only 140 miles away from you, wish he was that close to me.

I'll certainly defer to Sir Sam and others but this doesn't sound like a bad engine but getting it running will require some time and $s. If it has a 1st gen fuel head that's an easy DIY project (head with filter and wiring pigtail cost ca. $125). At those miles you might as well figure on the timing belt service soon. Depending on what you replace as part of that service it's $200-700 in parts if you shop around and about $600 or so in labor. If you are careful and mechanically experienced you can DIY, GDE rents the tools, especially if there is an experienced forum member to provide advice. In addition you are probably looking at about $1,000, depending on what you DY, to go thru the drive train and get everything up to snuff (belts, turbo hoses, air filter, oil filter and change, tranny service and filters, maybe brakes, etc) assuming the tires are good.

Best I can do at this distance.

Bidding on it? As in an auction?

Without knowing what the engines needs or what might potentially be wrong with it $2-4k.

I've been wanting a CRD Cherokee for a long time!!!!! Buy the Libby and bring her back to life. GDE is a great resource and this is hands down the best forum for the diesel.

I'm in the Ann Arbor area if u have any questions.

Sam, with all your experience with sad CRD engines, what do you think might be going on with this one besides a possible air issue? Is there something else that would cause that #3 code in your knowledgebase?