My jd 316 with the onan p218 engine after 36yrs is starting to tell me it's warn out. What to do. Rebuild or replace. Please tell me your thoughts.
I'd rebuild, the Onan isn't a bad engine, and it is the simpler solution because wiring and connections stay the same. If you have an interest in collecting JD garden tractors, a repower won't have the value an original-engined one does, and a collector won't pay you as much for a repower.
Honing the cylinders and replacing the rings isn't a great way to go, the bores wear egg-shaped (horizontal engines cylinder wear more affected by gravity). So, re-bore, new pistons and rings, valve seats and new valves. If bearings spec out, you could not replace them, but if you want to do it right, do the complete rebuild and not worry about it for another 36 years.
The 318 I have was a "partial rebuild" (bought it that way); valves and seats reground, cylinders honed with new rings, original bearings spec'd well enough to reuse them. It smokes when running, but gets less as the engine heats up, compression is good, makes good power, doesn't knock. It goes through maybe a pint of oil between 25 hour changes. There's enough soot and carbon in the oil that it needs the more frequent changes. 25 hours is about a full mowing season, this is mainly a backup mower and cart puller.