Hi Jon,
Based on the fact that the more-or-less structurally similar XU10 engine will fit then it should be possible to fit the 2.1TD in a 205. The sticking point may be the width of the head and how far out the back the turbo sticks. On the 8V XU10CTE (Activa) engine, the turbo runs into clearance problems and given that the XUD11 is has a wider 12V head, the problem could be accentuated.
What will not fit is the ML gearbox. It's too wide for the bodyshell but as all XU engines have a common bellhousing bolt pattern you can substitute a BE3 gearbox although you'd have to put a BE3 compaible flywheel and clutch on.
The engine mount will require some alteration.
For more advice visit the
205GTi Drivers Forum and have a search on turbo conversions using the Activa engine.
On the basis that someone (in Holland I think) has managed to squeeze a 2.2HDi in a 205, It seems quite possible to get a 2.1 in there..