Anyone got any recommendations for a good mechanic in Brisbane who is capable of dropping a 2.0 litre kombi engine in a squareback? Mine is a good mechanic but he is hesitant to put it in.

Pete from Custom Vee dub (stafford) may be able to help, give him a call (or Leon motors coopers plains)

Just my $0.02 worth, as much as I love the type 4 motor, the $$ you'd save engineering a conversion diverted into upgrade/re-build of a type 3 motor will give you a great result and still be fairly original.
The type 4 is a tight fit and never looks as good as original in their, plus there is a little more weight in a type 4 hanging behind the axle.