Why?
Possibly because the watercooled parts are badly corroded [particuarly if this is a marinised version as these engines were sometimes raw water cooled, and fitted with sacrifical Anodes that depended upon regular replacement]. Which is the usual problem with the later Lister engines that were an aircooled design modified to watercooled, and they also have some very quirky design flaws in terms of the cylinder block holding down stud arrangements, which can make cylinder block removal very difficult if the water side of the cylinder head gasket has being leaking.
Also the aircooled engine is cheaper for OEM parts, if you think OEM parts for Lister diesel engines are expensive, then the equivalent watercooled parts are usually 2 -3 times more so.
Quite easy to convert back to aircooled, as all the parts are just bolt on, also the fuel injection equipment is compatible. However as you have obviously realised you would be much better off obtaining a complete HR3 just for the parts.
The only downside to your proposed modification will be increased engine noise, as the water jacket significantly reduces the noise from the diesel knock of the engine.
Where are you located, as I know of someone who might be interested in the watercooled parts, if they are serviceable. PM me if this sounds interesting.