I would've thought that something bought in the 80s with a diesel engine would have a helluva lot of miles on it by now, and will probably have been used as something of a workhorse.
I have no idea on economy, but diseasel engines from back then weren't that amazing in either performance or economy AFAIK.
Dropping a modern TDI lump in a Mk1 would be very interesting, but I doubt there's many genuine good condition Mk1 examples around (did they even make a diesel Mk1?

)
Ah yes they did... (
Link) Person in that link claims 65MPG... not too shabby at all... They seem to think it offers some performance, which I find hard to believe.. (a 1983 1.6litre 8V diesel? come on)

How reliable? Probably fairly good, since it is a VW. and of course old Diesel engines are that much simpler (no spark plugs for one) so there's less to go wrong, and less to change for a service..