Just when everything was falling into place...loud knocking noise :S

i wouldn't be pushing it. peak power's at 6600rpm, that and hi k's i imagine oil starvation is a really possibility.

i have a fully reconditiond 3SGE 1992 head with 0kms since rebuild if your in need of one later on.
 
Rebuilt was done by Cesco, Devonport in tasmania and cost me ALOT of money before i found out my block was raped and not reuseable.
 
You prob wont need it but it you do, just throw a PM my way.

A loud knocking sound on startup that goes away after a couple of seconds sounds like a dry start, where the oil pump takes time to build up pressure.
Can often happen when the car has not been started for a while, and could be due to worn big end bearings or even a dodgy oil filter with a bad anti-drain back valve.
 
I wonder, when the motor is running, is it possible that sound may have been there for a while, only now you are really listening for it?

Just ace - The JDM is listed at 6.8k max power but yeh roughly the same. Those MR2 championship videos keep making me think our cars are really tough lol
Mandalay - 2.5k went into: Machined flywheel, oil seals, waterpump, knock sensor, timing belt, TB seals, v/cover gasket, oil pump seal, kirk engine mount, gear oil, new radiator, and labour for taking the engine out and modifying brackets to fit radiator. I then spent almost 2k into steering, bushings, brakes but that's another topic hehe...
WOB - thanks man I will def consider that if worst comes to worse. Still cheaper then putting a V6 in haha
Adrian - Don't worry he'll have a look over it and if there's something wrong then he'll give me a quote, that's how he works. But yeh if big ends are gone FML screw rebuild lol BEAMS here I go!! (nah prob just grab WOB's head but still need crankshaft work :/)
Reddtarga - I don't know if you remember but I had some knocking sounds back few months ago which eventually subsided and my mech did the oil change so he should have checked for metallic scraps. I'm not as experienced in "engine whispering" but I do have a good ear and I did pick out the noise faintly when I revved it up to 7k WOT (maybe oil starved at the high revs?)
Thanks for all your comments guys I appreciate it. Was hoping to make it for the Haunted Hills (paid up membership too) but we'll see...I'll let you know how it goes on Saturday.

upgrade

Don't let it get you down, i've destroyed 3 motors in the past. The one thing I learn't from it is that you can't let it dull your interests. In motorsport this will come up, you'll have motors go on you as its just the nature of mechanics.
 
I may suggest putting in a beams while your there. When I got my motor rebuild it was around 7.5k for a stock rebuild, there was damage to the crankshaft and I had the head redone at the same time.
 
I wish I had the time and space back then to fix it up. I would have saved an absolute fortune

Haha yeh seems the only smart and worthy long term solution is to upgrade. I wouldn't want to void my insurance by turning to the "darkside" just yet as I still have restrictions til August 2013 but I should get her running under 6 months if I save up and eat Mi Goreng and get all the parts ready (FT uni, PT work).
Motorsports was never meant to be cheap anyways but it was my first time blowing up an engine and a daily so it kinda sucks. Lucky uni and work is accessable by bus :D
MRTurbo - I was running Mobil Formula 20W-50
I was hoping to move out of the house during easter to pursue my dreams and enter races (strict parents who complain when I spend time and money on things other than completing my degree) I but that might have to wait. Have to somehow convince them not to sell the car...
But yeh 7.5k for a rebuild f**k that LOL. If the big end bearings are gone, is the head still okay? Because the head recon is like under $800 so the rest must be bottom end work? Which means my bottom end, basically the engine, is gone too? Or just crankshaft? I've only clocked like 10km since knocking.
Either way mech said I can go over 4k easy so looks like BEAMS is truly the best option here since I should be able to do it around there (Mandalay will flame me haha). Also called up Vicroads and Just Car and they approve of the swap, just need receipt of swap to Vicroads (Y)
One more thing do you guys reckon LSD is worth it? The choice has come down to either a budget Caldina/Celica engine with all/most attachments and a few extras I can piece together and make it work OR complete rear cut of a Rev 5 MR2 including the LSD tranny which is helical/Torsen I think :D. Rev 5 will cost almost 2k more than the Caldina/Celica swap tho so I'm basically paying for new tranny and LSD.
My ultimate 2GR-FE build will have to wait I suppose as this is not a short term solution from money's perspective but the bonus is that BEAMS can be sold later to the next gen p plater hehe
Thanks for sticking around fellas