This brings in all the problems associated with reciprocating engines. None of them are particularily efficient, but a Diesel is a lot better in this respect than a petrol lump.
I normally sit (Just) infront of a couple of fairly large turboprops (PT6's) and unless the things are knackered (which most of them are!) we are usually limited by the amount of torque the gearbox can handle, rather than other limits such as ITT. This says to me that having a vastly complex and expensive piece of kit like a gearbox stuck on the front of a dainty and highly efficient engine is a total pain, so a nice slow revving but torqey engine would be ideal.
"Modern" avgas engines are still totally in the dark ages when it comes to efficiency, their HP/litre figures are utterly laughable for example a new yamaha R1 produces nigh on 160 HP at the back wheel from a one litre engine, now look at an O-360 of similar output. It probably weighs in at the same as the whole bike and the R1 is liquid cooled.
Now obviously these are totally different beasts designed to completely differing briefs, but it shows what can be done with a petrol engine, but you have to rev the damn thing to almost 14,000 RPM to get the power from it. So again we want a nice slow revving diesel producing big dollops of torque from as low an RPM as possible.
All engines produce heat as a by product and unless the engine is as efficient as a turbine, then aircooling isn't really a satisfactory way of controlling temperature. Modern engines are much more dependant on controlling the temperatures better (ally blocks and heads tend to warp a bit more than old stuff made out of pig iron) so water or some form of liquid cooling is vital. Is it heavier? Yes and no. You can run an engine harder with water cooling since you can control temps better, so you can get away with more. Mind you how many Diesels are made of Ally? Not many if any at all.
There is nothing mythical about the plumbing needed for a water cooled system. How often do you get problems with your car unless it is donkey's years old?
Aircooled engines are dinosaurs and about the only place you'll find them being used with any regularity is in aero engines and lawn mowers. In fact my lawn mower even has electronic ignition and oil cooling so my Briggs and Stratton is more advanced than most Lyco's!
I still think that the best light engine is a small turbine with a gearbox, with enough of them sold to let the economies of scale bring the price down. It just needs a leap in production processes and the price of unobtainium to drop.