Today when I went out to the Jeep and turned on the air conditioner it responded with a noise that my friend descirbed at the scene as "pure evil under the hood" When I turn on the A/C I get a loud metal on metal grinding sound under the hood and then the engine bogs down and starts knocking, as soon as I turn the system off it stops. Any ideas? I'm thinking maybe the compressor is shot and I should be ready to shell out mucho $$$. Any ideas would help, I've never run into a problem like this before.

I think you have properly diagnosed the problem. Open the hood, have an assistant turn on the system while you listen to the a/c pump. If it is noisy especially metal on metal scraping, save up your money before you take it in. Alternative junk yard pump