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A '96 Outback might have the SOHC EJ22 engine not the DOHC EJ25 in your friends car.
Someone at a higher pay level on the forum should confirm or deny this info.
I reckon any EJ25 is a direct swap. Differences will be in the PCM and engine control management.
 

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1996 Outback has two different engines, this applies to 1996 only and Outbacks only, not other years or models:
96 automatic has a DOHC EJ25
96 manual has EJ22

Your friends 2003 has a SOHC EJ25

The 96, if it's an EJ22 (manual) doesn't work.

The 96, if it's an EJ25 (automatic) - doesn't work either. It is neither plug and play, nor are the intake manifolds interchangeable, nor can you easily swap the 2003 wiring harness onto the 96, the idle control is different and it's MAP, not MAF based. With some creativity I think it's doable...

If the 96 is an EJ25 - then you can use the short block and bolt your friends 2003 heads to it - assuming the engine is good. But you have to be careful about clearances and make sure you use thick headgaskets, there's very little clearance between the valves and pistons.

While I have done that swap before, I would not recommend using DOHC EJ25 blocks myself.

I would get the proper engine for it:
2000 - 2004 EJ25 engines are a direct swap.
Any 1999-2001 EJ22 is also a direct swap.

Sometimes you have to swap the passengers side cam sprocket and crank sprocket for the timing belt as they have different trigger points, but that's really easy with the engine out. If you simply swap it out as a rule, you're golden - if they're the same, then they're the same.

You should be installing a new timing belt kit anyway so it's really no extra work.

Ebay kits are $160 - $200 for all new timing belt, tensioner, and pulleys. Interference engine so it's not a good idea to skip those.

You can use later engines as well....but unlikely you'll find those for a reasonable price.

the 2003 has a SOHC, not a DOHC Ej25, they are not interchangeable.

there are three EJ25 varieties and they are not interchangeable: DOHC, SOHC, and VVT
Like I said, someone at a higher pay grade would confirm or deny what I said.
 
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