I'm at the beginning of a similar project.
As the 504/505 were designed with I4 and V6 engines, it seems like sticking to that sort of choice makes things easier.
I've seen a couple of V8's, which are not much longer than an I4, and an RB26 which is a drift car, so fairly unconcerned by firewall and length issues. https://www.facebook.com/505GTR There's been a couple of SR20's here in Australia too.
I'm planning to stay in the family and use a modern Peugeot I4. I know someone who used a Peugeot 2L HDi in his Range Rover, using all the ECU and engine loom from the donor car, while removing the immobiliser by re-flashing it, so that would certainly be possible.
One of the big issues is choosing a transmission. Retaining the factory trans and adapting only the bellhousing is probably the easiest way, but transmissions have moved on, much like engines. Unfortunately, the tunnel isn't designed to fit most of the larger autos out there today, and there's also the issue of adapting the torque tube to any choice that's made, or making up front and rear transmission mountings if you want to convert it to a regular tailshaft.