Diesel has better lubricating properties than kerosene / paraffin. If you use raw paraffin or heating oil to run a Diesel engine, you'll kill the injector pump. If you want to make a habit of this, find a Diesel (such as an ex-Army multi-fuel engine) that uses a separate lubricating oil supply for the pump, rather than relying on the fuel to do it.
"Diesel" can be either tax-free (unheard of in practice), agric diesel (red, cheap tax), boat diesel (blue, slightly cheap tax) or DERV (Diesel Engine Road Vehicle, clear, full tax).
I can't see any combustion engine self-generation scheme being cost- effective, compared to Grid. Even if you went for CHP (Combined Heat & Power) you need to have simultaneous demand for both heat and power to make it work out.