+1. pull the engine. much easier to do with heads, etc. on. I hate working in a bildge and would much rather have it on a stand in the shop with a much better working environment. Like you said the time will be about the same if not quicker. I think you'll regret it if you don't. Sounds like that's your plan anyway however you certainly have my vote in regards to pulling it. Be sure and keep us informed and good luck.

Mechanics Stehoscope
 

I just ran the engine and listened with a mechanics stehoscope, and I think that the noise is coming from the oil pump or distributor, or somewhere back in that area. There is a small brass tube and "T" fitting on the back of my block for the oil pressure sender and alarm sender and when I put the stehoscope there I get significant noise. Everywhere else seems to sound pretty good. Nothing abnormal under the valve covers or down at the bottom end. I thought maybe I would hear something in the oil pan, but that sounds pretty normal.

Anybody want to guess at what all this means?

Pull the distributor and check for gear damage on it and the cam, also if there is any side to side play in the shaft.

Distributor looks like new, and no play. I can spin the oil pump with a drill and it seems to be perfect.

New Development
 

Pulled the valve covers. When I spin the oil pump I get flow out of all pushrods on the right side (1,3,5,7) but no flow on the left side none. it does look like there's fresh oil on the rocker arms but I can't get any with my drill.

are you useing a mechanical fuel pump,i just replaced one that had a broken spring.the spring keeps the arm in contact with the pump drive rod.the noise was loud and sounded like noise in the valve train.

Yes it is a mechanical fuel pump. I tried to listen to the fuel pump with the stethoscope and couldn't hear any significant noise, but it's easy enough to check so I will.

Fuel pump looks and works like new

Strange??? Try and roll the engine over a couple of times and try it again. Both sides should be the same. Mike had an interesting point however it still remains that it is coming from the rear. Might be a long shot but is it possible to take a video clip and post it on utube or otherwise forward it to my email address and I will post it for you. I can understand you hate to pull it if it's something simple. Just seems like you've ruled most everything out. Rear Main??? Can you tell by listening and watching your oil pressure and see if the noise goes away when pressure goes up? Hang in there...

If the noise lessens when first started after oil pressure comes up you have a bearing problem, is it quiets down as the engine warms up you have a piston problem. valvetrain noise is usually descibed as a ticking noise and rotating assemble problem is usually a deeper sound. Try isolating noise by pulling plug wires off indiviually and see if you can isolate which cylinder has the problem. Have you pulled all the plugs and looked at the electrodes to see if you have a floater in a cylinder? BTW stethoscopes will leave you chasing noises all over the place