Any cavitation issues related to water pumps will be more due to high revving hot engines combined with poor coolant quality rather than water pump impeller gap.
Reducing the gap will increase the flow but then you need to be sure that the other components in the system can handle that. Also be wary of pumping coolant too quickly through the radiator..
I'm new to TD42 engines but I've done a fair bit of research since I started my conversion and I haven't come across any other mention of these engines having cavitation issues with standard water pumps.
This is why I found BA's original premise interesting.
As Cuppa mentioned, these TD42s have more of a reputation for solidity and longevity.
Here's a pic of the original water pump I removed from my engine. Not the slightest sign of cavitation erosion.
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