Is a 86.5 engine different than a 86 or 85?
 

no its the early 32v engine,
the S4 version starts in 1987

Compared to what ???

No real disadvantages to the early 32valve engines. There are many diffrences. The valves are smaller, but the cams are bigger. and the intake is optimized for mid range torque. The engine management system is rudimentary compared to 1987 and later. Some people ,like myself, appreciate these attributes. The torque is a bit more usable at legal speed.

The later 32 valve engines have their virtues and are a nice evolution consistent with Porsche's design evolution and development ethos. The reduced cam timing and more sophisticated engine controls helped the engine meet the more stringent federal NOx emmisions for MY 1988 yet produce more power. The variable 2 stage intake and slightly larger valves allowed the engine to make more power at higher RPMs even though it had less cam timing. Some say torque suffered and I agree.

Me and many others prefer the simple and early 32V engines with their more American torque curve that you dont have to wind out as much to get a grin. I also find the early engine's intake more aesthetically pleasing. These are just some of the reasons the 1986.5 928's have cult following and even more so if its a 5 speed.

Most of the 86.5 engines have the updated valve cover hardware with one piece Allen bolts instead of the two piece hex headed hardware.

All the engines that I've seen with the updated hardware also have the '87 and later tensioners with custom oil lines to work on the '85/'86 cylinder heads.

The intake gaskets were improved to a metal spacer with integral "O-ring".

All are huge improvements.
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There's a fine line between buying and stealing....you are closer to the later!

Your engine has the "later" vastly superior valve cover hardware. Incidently, that updated hardware was just slightly over $1000, from Porsche, when they still had it! I bought many sets of it, when redoing these engines....getting rid of the terrible '85/'86 hardware.