Heres the update, lets keep in mind the vast majority of good old IDIs on the road are not sleeved. I would have loved to sleeve the whole block or the back four or even back two but Im relying on advices of someone much more experienced than me.
I brought everything to Edwards Machine Shop in Goldsboro NC, he confimed that my #7 cylinder was extra large but he measured +.012". He has been in business 27 years and specifically only machines diesel engines. He has sleeved over 200 of these motors through various contract and individual work, as well as thousands of other sleeves in big rig and ship diesel engines. I called several diesel performance places in the area and each one recommended Edwards machine shop.
That being said, he told me that every other cylinder, including #8 is spot on for bore tolerances and that if it was his engine he would only sleeve Cylinder #7, obviously because of labor and cost etc its not worth the money to do anymore than you have to. His name is Mike, and he showed me all around his large shop, we talked about cavitation and he talked about his experience building and machining the engines it was nice to speak with someone who could confirm and understand all of my research. He said the towing of my car probably caused the piston to go off balance and start knocking in the larger bore. He calls it Piston Walk. He told me to check for piston damage on the piston skirt but I looked at my #7 piston and it has no abnormal wear from the rest of the pistons so I think I am going to keep it. Also it has less that 150 miles on it since the knock began
He is going to sleeve #7 and bring it back to spec, remove old and install new cam bearings, hone the cylinders, hot tank every single piece of the engine besides the valves, crank and pistons, all for an exceptional, military friendly, price.
Heres my parts list:
-Comp 910 SPrings
-Banks Downpipe
-Typ4 Injectors, Cam and IP
-Northern Auto Engine re ring kit
----felpro gaskets
----STD Main, STD Rod bearings (cam bearings are from machine shop)
----Yes they have the IDI turbo piston rings available for the kit if you call and ask they will swap for the N/A ones. Turbo rings p/n:42104, s42104 for singles.
-Facet Lift Pump
-Fuel Pump block off plate
-LuK clutch kit from Summit.
-AC Delco steering box.
-ARP studs
-Sealed Power Lifters
I bought the old DTI 3300 timing box and the light that goes with it so I can do my timing once she is back together. I think Ill post into the timing registry and rent the equiptment. $200 down payment, $150 returned if I get it all back in one piece.
It is relieving to know that I have successfully diagnosed and found the cause of the problem because as I was tearing this apart I couldnt find anything obviously wrong. There was some scoring on the #7 cylinder that Mike pointed out to me as well. All in all I am feeling good about the build.
I am very grateful for all of the advice and tips you guys provide so please dont hesitate to chime in.