Having owned an air-cooled diesel tractor, I can honestly say that if you can stand the noise, there is nothing wrong with them. I had a Belarus 420AN that used a Russian-built 4 cylinder air-cooled diesel engine, which I've been told by some was just a copy of a Deutz engine (from what I've heard, Deutz is the king of air-cooled diesels...but I've had not experience with a Deutz).
My Belarus had a belt driven "squirrel-cage" fan mounted on the side of the engine. It simply uses this instead of a water pump-mounted fan to cool the radiator. A shroud directs the blown air across the cylinder heads, which stand individually with fins all around them, increasing the surface area for better cooling. There were also deflector plates on the other side of the cylinders, making sure that the air got circulated all the way around the head.
The tractor also had a 12 qt. oil pan and used an oil cooler (it ran in loops in between the fan and the cylinders inside the shroud). So effectively, the oil was air-cooled too, so while the engine is called air-cooled, I'm sure that the oil has a fair amount to do with helping keep it cool.
I, too, was concerned about the engine getting hot, and noticed that the temp gauge for the engine was pegged the first time a used it (it went up to about 140 celcius, I think). I called a couple of dealers, with no luck, and then finally called the Belarus Machinery Company (who was importing the tractors) and they told me that the Russians used the same gauges on the water cooled and air cooled tractors, and that the normal operating temp for the air-cooled engines was actually about 150-160 C. I bought an aftermarket gauge ($10 at Wal-Mart) and installed it, and sure enough, it ran between 150-160, which I think is quite warm. I ran a semi-synthetic and full-synthetic oil in the engine after discovering this, and it gave the engine a noticeably quieter sound and easier starting....of course, it also cost over $60 to change the oil.
I used the tractor for over five years in 90 to 100 + degree weather in the summer, bailing and hauling hay, loader work, etc. and also some in the winter (although until the last year or two that I had it, I couldn't get the glow plugs to work so I couldn't get it started in cold weather). I must admit that the engine was the strong suit of the tractor; I never once added a drop of oil aside from oil changes and never had any problems with the engine itself. I got rid of the tractor, primarily because of hydraulic leaks, electrical problems, loudness, manueverability, etc. but it served me well most of the time. If you can't afford a better one, a Belarus air-cooled tractor will do for a while, but it's not much on creature comfort.
In conclusion (bet you thought I'd never shut up), I wouldn't be scared of air-cooled engines, but they are a bit of a different animal than water cooled.
Take it easy
Tim Gray