I'm going to pipe up here and share an experience I recently had with one that was knocking ('83 300SD). First I have a question though. Do you hear the knock while starting the car prior to the engine "catching" and running on it's own?
The reason I ask is because I just recently had one over at the house that was knocking. I could loosen up the #1 injector and the knock would pretty much go away. My first thought was that the car needed a valve adjustment. Adjusted the valves and the car continued to knock. The car started very easy cold or hot and ran out real well with no excessive smoking or shaking. Anyway, while I was nosing around under the car (it was on the lift
) I noticed that the oil pan had been somewhat smashed. In talking with the owner he said that he had records from the previous owner where they took the car in to an independent and they were unable to ascertain why the car was knocking. Anyway, I pulled the lower oil pan and there were some pretty good sized chunks of aluminum laying in it. Took a flashlight and looked up into the #1 cylinder and I could see where most of the piston skirt was gone. I can only surmise that when I loosened up the #1 injector then this "unloaded" the cylinder and made the knock go away. This type of knock is called piston slap. If yours does not knock while cranking with the starter prior to running then this is probably not the same issue.