What makes you say the 1.7's were unreliable?
I'm pretty sure they changed to a 2.0L block of their own design because of supply issues with MB - always a problem when using short production lifespan auto parts.
As far as the gearbox reliability issues go, I have heard from an ex-Thielert engineer that the 300hr, now 600hr inspection was a bit of a con and amounted to not much more than a poke around with a borescope through an inspection hole before sealing back up and shipping back to the customer. They also mentioned that the military/UAV derivatives were much more advanced than the GA version because the re-certification issues were a financial burden the product couldn't bear, despite the leaps and bounds made in the military applications of essentially the same engine.