Thanks for the good replies and advice.
Aside from the tapping the car runs perfectly. It had too much oil when i got it, but its been drained to the correct level. I noticed the bottom brackets on the radiator fan were missing and had them replaced. The engine gets to 80` c and stays there, so overheating isnt a problem. The previous driver was just a bad one. The tapping sound is exactly the same as the sound my 124 made before i had the valve lifters replaced. One of my friends also drove an engine to the point where it seized, but the only thing he managed to salvage turned out to be the pistons. I have heard of some big diesels with cast iron pistons that deform slightly due to overheating. Deform, not shrink.
The explanation i was offered from the mechanic included the fact that the tapping gets louder at higher temperatures due to the piston shrinking. I dont think that a piston shrinking a few micrometer travelling at that speed would cause a tapping that loud and slow.
Theres no white smoke coming from the exhaust, so no oil is being combusted.

Maybe he just has a spare engine lying around that he keeps tripping over and saw this as a chance to get rid of it and start the year with some money.