VW Diesel specific stuff, ignoring all the other used car stuff to look for:
These engines typically survive to 250,000 miles / 400,000 km
Are all the idiot lights working, particularly the oil pressure warning light.
Head gasket: Look for oil in the water and water in the oil. while its still cold, remove coolant cap with it running watch for air bubbles in coolant Check this again after a test drive. Look for leaks around the edges of the head.
Be there for a cold start to see how easy it starts. colder the better.
When was timing belt last changed? Pull back top cover and look at the belt to see if it looks reasonable. You'll want to change it if the age is unknown.
Look for diesel leaks around injectors and the injection pump: particularly seal at shaft, seal at cold start lever (between pump and head). Look for air bubbles in the clear return line
Pull the crankcase vent hose, how much oil is in it? Does it blow smoke out the hose if you rev it? Does this correspond with the owners claims about oil useage?
Pull the rubber intake hose off turbo, is there a puddle of oil in it from blowby? Turbo should spin freely, no chips in compressor vanes. How much play is there in the turbo both axially and radially?
Look at the glow plug heads, do they look new or ancient? Same for injectors. Look at V-belts, they tend to loosen. may give you an indication of how well looked after the car was.
take it for a boot and wail on it. Too much smoke? Back up hard with window open, does exhaust smell like diesel soot or burning oil? Watch for the oil pressure light to come on after a hard run, if the intermediate shaft bearings are shot, it may have trouble holding pressure when hot.
I'm not sure if '86 woudl be hydraulic or solid lifter....valve noises?
If your really serious test the compression and do a leak down test.
These are great engines. Most trouble free engine I have owned, considering mileage and abuse it gets.