John:

What you hear is the camshaft lobe hitting the tappet, which is too low (sounds just like excessive lash on an all mechanical system). Won't hurt much except that the affected vavle isn't opening far enough. If it is the intake, you will have low compression in that cylinder and get injector knock and loss of power eventually.

If it is the exhaust, you will get poor cylinder purging, just like exccess EGR -- lots of smoke and rattle from poor combustion.

The kicker is that these cars simply do not smoke -- the trap oxidizer or catalyst (you do have the trap oxidizer removed, don't you?) removes the smoke. My "new" 87 300DT doesn't smoke at all, and it has a cracked head and probably worn cylinders -- #4 knocks something horrible and it shakes really hard (only 4.5 cylnders working) at idle. Starts a dream and runs fine on the highway......!

I would change it, but I'm a purist.

Lifter is about $40 or so, but it will take an hour or two of shop time to replace since the camshaft has to come out. More if the cam is bad or you need to replace more than one.

Peter

__________________
1972 220D ?? miles
1988 300E 200,012
1987 300D Turbo killed 9/25/07, 275,000 miles
1985 Volvo 740 GLE Turobodiesel 218,000
1972 280 SE 4.5 165, 000 - It runs!