Diesel engines produce plenty of exhaust soot. Cooling the exhaust can add to the problems and reduce heat transfer. There are a number of folks who have done it, and to the best of my knowledge, made it work.
CHP is the holy grail, that's for sure.
Interestingly, with an efficient diesel generator and the use of an efficient heat pump, it's well within the possibilities to get more heat into a building than simply burning the fuel at high efficiencies would produce.
Today, a good "air source" (conventional, like a mini split) heat pump can produce 3x more heat than energy it consumes. Put another way, 2000 watts running power required, 6000 watts of heat produced into the building.
Add in a combined heat system with a well configured diesel of 35% efficiency, and one could, without much difficulty, pump in an additional 3000 watts of heat from cooling and exhaust, producing 9000 watts/30,000 BTU of heat, or 2.5 tons of heat.