I used the soft fiberglass tape from West Marine, and secured it with wraps of stainless steel wire, which was included.
My engine stringers were rusty, especially the starboard one, but when I ground it down to bare metal there was still enough there to make it worth keeping. I primed it with Rust Knock Out, and painted it with barbecue grill spray paint. Now that the 'new' engine is in, and it is fresh-water cooled, I hope to have less water in the bilge. Maybe that will mean less rust.
If my engine stringers had been in bad shape, I would probably have kept as much in place as possible, and bolted on a stainless steel L bar. But with all the metal out, I think I'd do the epoxy-encapsulated oak rather than metal. That way, if it turns out too tall, you can take a hand planer to the stringer and knock it down to where you want it to be - too low and you could build it up higher. With stainless steel, you better shoot a little low because it is really hard to make steel change its mind once it is in place.
I think I'd still use independent engine mounts rather than bolting the engine directly to the stringers, especially with a diesel, as it should reduce a bit the concussive thudding of the engine underway. Keeps the beer from foaming up and out of the bottle. One of the benefits of the Atomic 4 is that it is one smooooooth engine. Can't always tell if it is running, especially if the radio is playing.