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Are there any compatibility issues that can be expected when replacing a VEA D2 (88kw) engine with a D3 (110kw) engine?

The problem with oil consumption and the replacement engine would be a complete D3
 

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MY17 V40 2.0 D2 Momentum Nav + Passion Red, Winter Pack, Power Seats and TFT Display
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D2 D3 D4 VEA engines are all the same engine, it's the mapping that's different. So technically you'd be swapping the same engine and getting the same power as before as that's what's mapped on your ECU and that's assuming your ECU works with another engine.
 
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