I have a 1996 Tacoma 4X4 with the 2.7. My engine knocked like that for about 160,000 miles but never caused any problem. I now have 257,000 miles, the knock is gone, the engine runs GREAT and doesn't use oil between oil changes at 3,000 mile intervals. I am rough on my Taco because I off-road it on hills, cliffs and rocks, but I have not had any problems with the drivetrain. Replaced the original clutch at 238,000 miles.
My exhaust manifold did crack but I replaced it with an LC Engineering header for about the same price as the manifold. I use the Toyota oil filters because of the anti-drainback valve they suposedly have to keep more oil up in the engine when it starts up initially.
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