Worn cams will definetly make the engine loud - but usually the front of the cams wear before the rears.

86560SEL: Driving with bad cams isnt good in that you'll have worse fuel consumption and less power, and it'll be loud and probably misfire as they wear even more and inhibit proper combustion - I don't know what might happen if the exhaust lobe is worn but the intake isn't, but I don't think catastrophic engine failure is a result. If you DO have a bad cam, start looking around on eBay for them. Hell, I'd settle for a cam from any m116 or m117 with hydraulic studs if I were you. An old 4.5 cam, or a 420 cam may even give you more power?

What type of knock is it - octane knock or mechanical-sounding?