I know we went through all of this several months ago
("Do the Commodores
really need the 9VAC?"), but my 128D has an AT power supply in it,
therefore is not feeding the system with 9VAC, and is functioning
perfectly well.
I've even pulled the PSU out of a 1571 and use an external Molex from the
AT PSU in 128D to power the 1571. In my mind I say it is more efficient.
No empirical proof of this, however. :)
I downloaded the schematics of 128D and took a fast look.
The 9VAC generates three tensions: +12V, +9V and 9V unregulated. 9VU
goes to the cassete. +9 goes to the expansion port and +12 to the rest of
the computer.
I'd bypass everything and connect 12V inside, after the 7812 regulator.