The extra short M46 first gear must be even more pointless than usual with the 3.91 axle, it's barely useful even with the 3.54. Nice setup for towing though maybe.
I believe regular 240 M46 cars had a 3.31 rear axle and diesels with M46 had 3.54 (both for 200 and 700). Probably wouldn't be hard to swap a different axle in someday as the 3.31 ones I assume are plentiful.
Or the owner could keep the current axle ratio, raise the suspension, and put on a set of big AT tires -- then the short gearing might be a benefit!
Sharp looking engine bay, nice color choices.