Yes, we will get the better engines in lighter vehicles. The problem with sulfur is the after treatment of exhaust gas. With sulfur, running this through the oxidative catalyst makes sulfuric acid which will rapidly wash the catalyst metals from the ceramic.
Diesels already make the emissions requirements for all but NOx and particulate emissions. Oxidation catalysts are needed for the latter while reduction catalysts are needed for the NOx. And that sulfuric acid plays havoc with the reducing catalyst.
Imagine a 1/2 ton truck with a 3.5 liter diesel getting 30 MPG. Not impossible. How about a full sized passenger car getting 40 MPG? These vehicles are every bit as quick as comparable gasoline-fueled engines but offer much better drivability since the torque comes on fast. As such, small diesel engines feel like much bigger engines than they are.
Now if we see more direct injected gasoline engines, the diesel will lose its advantages. DI gasoline engines have injectors like a diesel but also a sparkplug. Ignition happens before top dead center so much higher compression ratios can be used, increasing the thermodynamic efficiency. Since the "burn" is protracted, the cycle mimics diesel in power output but at the expense of complexity.
I'll take a diesel any day.