I have been told that if the pistons had gone then there would be a lot of smoke. It could be the piston dampers or the rods. I believe these parts are cheap but the whole engine has to be dismantled to find the actual issues. I will persevere and try to get the issue resolved.
That's correct - a piston failure would lead to plenty of blue / white oil smoke and the engine would probably seize due to debris from the piston.
Is the noise a 'tap', like you'd get if you tapped a knife and fork lightly together? Or is it a deeper, louder knocking / clanking noise? Also, when does the noise actually happen -- can you hear it ALL the time, or is it only when the engine is stone cold? Can you hear it when the engine is pulling (i.e. when you are accelerating) or is it only when you lift off the throttle?
If you can better describe the exact nature of the noise, we might be able to help steer you towards the problem.
The oil leak could be serious, or it could simply be a leaking sump gasket or rocker cover gasket, which would be a cheap fix.
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