I realize this is an old thread but I figured I respond anyway. The 3208 was considered even by CAT a throw away engine, at least the early ones. They later improved the design with such features as three ring pistons, etc.
A rebuild on a 3208 is fairly inexpensive and easy to do. CAT dealers will rebuild them and they still offer an exchange program for them.
The 3116 would not, IMO, be of much benefit as far as an upgrade would be concerned. They are of similar power outputs and will consume similar amounts of fuel. The 3116 would be a bit better on fuel, but the cost of repowering would make it a poor choice.
If I were to repower I'd probably go with a bit larger modern engine. Possibly a QSB or QSL Cummins would be a great engine of choice. Both have a good reputation in both on-road and marine applications. The on-road versions of them would be the ISB and ISL respectively. The B model would be similar in power to the 3208. QSB's can be had mechanically to 370hp and the electronic ones to around 400HP. The QSL can be had all the way up to 500+HP.
IMO the QSL has some advantages in that it is a roller can, wet-liner engine. But it is a bit bigger physically than the 3208 so fitment may be an issue.
Perkins has several engines that would be a good replacement if you wanted to upgrade to a more modern engine. The 3126(aka C7) and C9 are electronic CAT engines that are also similar in power and foot print to the 3208. The C9 is a bit bigger, similar in size and power ratings of the QSL.
NC Power is a good outfit, I've dealt with them quite a bit as well as NC Machinery. I believe Craig is still at NC PowerSystems and was a good guy to deal with.