1990 c2500 chevy truck w/ 350TBI but has a 96 vortec block.

Lets start from the beginning. I got this truck knowing needing a timing set. I replaced timing set back in may 2009. After doing that this thing loud knocking noise on the top drivers side of the engine. When pulling the drivers side valve cover it got louder. This is at idle. Checked pushrods and none bent on the drivers side.

When getting this truck the previous owner told me that he let someone use who doesnt care for there vehicles. When he got it back it had no oil it and was qeaking and knocking really bad. Plus somehow the plug on the CTS melted and who knows how long that off the CTS. I did fix the wire and replaced the CTS and it took 3 times of running it from cold start to get a reading on the thermostat gauge. The reading was in around the middle after running for 5 minutes.

I recently acquired a engine stand the other day and the I bought from said I might have a crushed lifter. He said also to putting 4 quarts of oil with 1 quart of trany fluid in it to loosen it up. I tried marvel mystery oil but it claimed the noise some. The knocking noise goes away when hitting the gas pedal. I know the knock noise is bad in sound when the truck sits. When ran it 2-3 days in row back in june or july it wasnt so bad in sound since was running 2-3 days in a row. I do know that the oil stays black all the time or turns black after changing it. Also the oil has a little dark gray tint to it also at times but not all the time.

So do I fix the knock noise and replace that crushed lifter or better to rebuild it and start fresh from a rebuilt engine? meaning new pistons, cam, crank, lifters, piston rings, etc.

If I rebuild it I want it built like a 454 with lots of power and torque. I know it won't be exactly like a 454 but I want it in a 350 sb version of the 454 bb.

This hasn't seen the road yet since getting it back in may 2009.