[VT_Toy]

Yes, your engine is getting ready to self-destruct. Replace the timing chain and guides soon, or risk much worse damage when the chain breaks!

engbldr.com has a kit with a steel guide that replaces the plastic guide that usually fails.

 

[VT_Toy]

I had a bad head gasket that caused my 22RE to use water, but none showed in oil. Compression was fine too. But it would sometimes have a hard time turning over when it started, due to water in the cylinder, and then blow white smoke for a little bit.

How many miles on this engine? Do you have an oil pressure guage? When does the knock occur, just at startup? Or all the time? If so, at what RPM range? I had my oil pickup screen get clogged and I would have really low oil pressure at low RPMs and it would knock a little.

 

[VT_Toy]

I've heard of loose chains rubbing a hole in a coolant passage. That can let coolant into the oil. Could be a small enough hole that the coolant is getting boiled off fast enough to not make the oil foamy.