What year is it?
1985 and newer had some improvements on the engines to reduce the chances of block or head cracks. Older ones are not guaranteed to have problems though. Many have good results with them.
As others said, a turbo is always welcome on a diesel and these are no exception. If you're happy with around 200-220 Hp at the crank (170 stock), the engine will last just fine. I usually recommend 10PSI peak and 7 PSI sustained for a non-studded 6.9IDI. Others have reported 10-15 without problems but I prefer more conservative limits (not everyone has time to do a headgasket job on the weekend). Even 5 PSI will be enough to make a noticeable improvement while also reducing EGTs.
If you have the time to put some work into the engine, My advice would be:
1. do a compression check first.
2. As a minimum, refresh the head gaskets and install ARP head studs. Unless you're building a custom monster turbo setup, you'll never need to worry about head gaskets ever again.
3. Inspect the bottom end, valvetrain and cylinder bores. Most of us would rebuild at this point anyway, but it's not always necessary. If you want to get practice rebuilding engines, this isn't a bad one to start with, but there are some things that can get you in trouble if you're not careful. Piston to valve running clearance is one example. Having oil seals that are too tight on the valve stems is another (causes premature valve guide wear)
4. If a rebuild is not planned this time, at least get a reseal kit for the engine.
5. And lastly, if the compression check is good (minimum 400PSI), you could simply throw a turbo kit on there, keep the boost at mild levels and just enjoy it. It all depends on how much you want to spend and if you plan to keep the truck for many years to come. I didn't honestly think I would still have my truck after more than 10 years (it didn't look much better than yours when I bought it), yet here I am, still driving it.
