An unfortunate turn of events... (or fortunate, depending on which way you look at it).
Having been chasing 'phantom knock' for over 6 months, and having replaced pretty much every possible part that could cause phantom knock, I decided to replace the oil pickup (thinking perhaps the knock was caused by the stock oil pick up splitting and sucking up air, preventing good flow to the bearings).
Anyway, the oil pickup was fine - but my mechanic noticed metal chunks in the sump
The smaller chunks are magnetic, and the larger chunk is alloy. My mechanic was able to turn the crank and could not see anything obviously broken, however he was able to wobble #2 rod by hand (in an up/down direction)... so suspects the big end bearing for #2 cylinder has worn. Perhaps a chunk of it has got jammed somewhere and broken off a chunk of cylinder, who knows.
Anyway, to cut a long story short - I figured there was no point putting the sump back together and continuing driving like that – so the engine is out, and a refurbished 'built' engine is currently being checked over, before getting put in.
The new engine specs are:
MY06 WRX complete engine (EJ255). Bottom end has Manley rods, Mahle pistons, ACL race bearings, Cosworth oil pump, new oil cooler, cylinders bored out to 100mm. The heads were overhauled and the larger WRX valves compared to the Liberty, and have Cosworth valve springs and head gaskets, ARP headstuds and case bolts. The engine has around 20,000kms on it since the original build, and will have the bearings replaced and everything inspected before I take ownership of it. I'll also put in a fresh timing belt kit and water pump, plus equal length headers.
It will be quite a different beast!