...Btw, I am finding it difficult to comprehend the cyl sleeve is physically sliding up and down in the block, causing an actual knocking!?
Plus no coolant consumption, Bizarre

 

Automotive machine shops specialize in these unique engine jobs.

Make sure it's not something misleading like a PS pump or other external component going bad. They can make loud knocks.

I'd pull your rocker covers and take a look around. There may be something else going on. Check out the push rods, and check that one of your rockers isn't missing its push rod pad.

 

Ha! Well I did drop to a lower weight oil-Liqui Moly MoS2 10/40 vs. the usual GTX High Mileage 20/50. It has done a good job so far, but in the heat it seems to make the knock a bit worse. I can tell it's a great oil though-I highly, HIGHLY recommend it. It's actually for old air-cooled Porsches (my other real expertise in cars) and seems to be so good at lubricating that it doesnt want to wipe off the dipstick when I check the oil, It spreads more than what goes on the towel.
I'm currently running a 170 thermostat, I had the thermostat out completely for a few days though and it still knocked-the temps were actually climbing higher than with the 170 stat in oddly enough. I guess it's from there being nothing to slow the coolant down. Regardless, It's been a challenge. The highest I have gotten the temps with the 170 stat was 100c...and oddly enough the knocking wasn't there. Thick traffic and then sitting on in the bank drive through for about 10 minutes. Doesn't seem like that should be a massive issue...but man, do the rover gods think otherwise.
Also, I am concerned about some of the stuff on the serpentine-there is a whirring noise that seems to come and go. But this knock is WAY too loud to be coming from an accessory. Honestly, it's worse than the chrysler 2.7's that had bad rod bearings at the sketchy car dealership I used to work at. Already checked the bearings as well, they are in fantastic shape for 160k miles. The valve covers were pretty badly clogged up with sludge-she was definitely on the wal-mart special oil for 10k miles at a time-but nothing appreared to be missing or badly worn.

Also, I shall post a video of the knock. It's from a while back before I figured it was the liners, but still the same sound. Seems to come from everywhere-but fairly certain it's from the P/S far rear cylinder.
http://www.flickr.com/photos/46909521@N06/9069942319/