My 15 year old VW TDI only has about 90 hp but has no problem keeping highway speeds, towing 1500+ lbs or getting high 30's MPG in the city. My wife drove this wagon since new and never had problems filling it with diesel even though it was her first diesel she ever drove.
I used to drive a little Mazda pickup with a normally aspirated Perkins diesel that would get similar mileage of the newer VW but had less than 60 hp. I used to tow a little fiberglass Scamp behind it in the Sierra Nevada's and still get mid to high 20's in MPG.
There's definitely a use case for small diesels and I would probably own a manual diesel Smart if they sold them outside of the gray market in the US.
