Prior to the current (Tier 4) standards, the Tier 3 standards had already reduced NOx and particulate emissions to the the point that it's misleading to characterize those engines as "filling the air with pollution". Now that CO2 has been declared as pollution, the improved thermal efficiency of diesels over gasoline engines probably means that they were already "better" than gas under some operating conditions. Even ignoring their superior thermal efficiency, Tier 3 diesels achieved similar results to gasoline engines when both were operated at high load (Say, running down the highway at 80mph). This was accomplished with technologies that, while they added complexity and cost to the engine (such as direct injection, EGR, DOC, VVT, advanced FIE, improved combustion chamber design, increased compression ratio, advances in turbochargers), did not compromise the utility and safety of the device using the engine.

As you have suggested, many manufacturers will probably move back to gasoline engines in some of the smaller applications ... but they will moved to air-cooled V-Twins for many of these, which fall into the same power range as the diesels they replace (~20-40HP). Air-cooled gasoline engines are not clean beasts, and this move will probably actually end up being a net environmental loss.

Have a look at the chart on page 2 of this: http://www.mtu-online.com/uploads/tx_templavoila/WhitePaper_...

The additional NOx reductions achieved by tier 4 are extremely small compared to the cost & trouble caused by the technologies used to achieve them ... the previous tech (up to Tier 3) was fairly reliable & had already achieved most of that was had in the overall journey from unregulated -> Tier 4.

Also, almost none of the garden tractors sold are diesel, because in that application it doesn't make sense - those engines aren't run at high load for long periods of time. However, for a compact tractor that may well be run all day long in high heat with a demanding attachment, a diesel actually does make a lot of sense - there is a large environmental cost to dumping a machine with 5-600 hours on it because the engine gave out prematurely (which happens to entirely too many of the garbage lawn & garden tractors sold at box stores, despite their relatively easy lives).

FWIW, I let my lawn die in the summer and probably mow it fewer times in an entire season than many folks do in a month ... living in the sticks with nobody to judge me has its benefits :) You did get reasonably close on the size, though. My dad and I live close enough together to share a tractor, and we have 26 acres, a goat, five horses, and sundry other critters between the two of us (and our wives, of course).