Do a compression test to make sure all cylinders are 20 percent of each other. Your rings are most likly gone and need to be replaced.The loud knocking could indicate a spun bearing. Witch all and all you are going to be rebuilding the motor. I don't know about a gen3 motor swap i normally wouldnt swap in a differnt motor unless it has a dramatic diffrence in power and torque or just maybe torque like a diseal <img src="/forums/images/graemlins/smile.gif" alt="" />

93 montero sr 3 inch body lift 31x11.50 super swamper ltb, 2 8inch 130 watt pro comp off road lights, 2 55w lights on the rear bumper, rear air locker, magnaflow exhaust muffler,superwinch manual hubs,15x8 black rock crawlers (steel)