Well, I laced up my flamenco dancing shoes and headed out to the garage today. Here is the scoop of what I found:
1. Unknown oil pressure as I don't have the correct parts to hook up the pressure gauge. I'll have to order them. I think I have oil circulating as the fresh oil I just put in is dirtier now than new. Also I loosened the cover to the oil filter while the truck was running and oil quickly started flowing out.
2. I removed the valve cover and spark plugs and rotated the engine by hand. I watched all valves open and close and I checked to see if all push rods would twist and wiggle just a bit while the valves were closed. They all had similar movement and tolerances to each other.
3. Exhaust with muffler installed. Engine much quieter.
4. Removed belt to isolate the pump and generator and ran with no change in knocking sound.
5. Used broomstick to try and isolate sound. I feel like I get the loudest sound while touch it against the oil pan.
6. Pushed in the clutch and watched to see output of transmission stop spinning. No change in noise.

I also pulled back the side lifting rod cover and listened for a change in sound but nothing. I think the sound is coming from the oil pan. With the engine off, I tapped on the bottom of the oil pan and I get a very similar tinny knock sound. I tried turning the engine by hand with the spark plugs out trying to reproduce the knock but it doesn't seem to happen. I need to get a helper to turn the engine for me while I lay under the truck and listen. Hopefully I can make that happen this week sometime. I did notice the bottom of the oil pan is pressed in the slightest bit...almost like when a square tin can puckers in a bit. I don't know how tight the tolerences are behind the oil pan, maybe enough for something to rub? I guess I should probably drop the pan next and see what going on there. Any other ideas before I head that direction? Thanks for all the help everyone, it is very much appreciated!

1951 Chevy 3800 ~ "Bella"
In the Stovebolt Gallery
More pix in Photobucket