Loud knocking noise from the engine

Help!!! I started my '91 300E this morning and there was this knocking and tapping sound coming from the engine. It gets louder and seems like something was about to fall apart when I put the car in gear and foot on the brake. The oil pressure was fine and no warning lights came on. I popped the hood and listened and it seemed like the noise was coming from the top front of the engine by the distributor and the timing chain cover. Broke out the mechanics stethoscope and confirmed the knocking /tapping noise was coming from the forward part of the cylinder head. As I was doing this, the engine warmed up and the noise seem to decrease but was still there. Still gets louder when I put the transmission in gear.
Can anybody out there esp. MB DOC and Stevenfl give me an idea on whats causing the noise. Is this an indication of a timing chain going bad or much worse? Mileage on the car is 124K and never had major problems with it. I did not move the car at all today and probably not until I get help from the forum and Im sure I don't damage the car any more. HELP and thanks in advance.