That sounds like its in the valve train, but it might still be an exhaust manifold gasket. Pushrods bend because of other problems. My bet is a bad lifter, broke rocker or bad valve or maybe the gasket.

Turned out my knocking/ticking was a bad exhaust manifold gasket.

Hmmm......And your tapping sounded exactly like mine??

I pulled the valve cover on the port side (I believe thats where the tapping is originating). The rockers and springs look ok...What is the procedure to check the pushrods? Do I just unscrew the rocker and pull the pushrod? If ok, what needs to be done to re-install the pushrod correctly?

--I didnt pull the exhaust manifold--only the riser when I removed the valve cover.

I let the Merc techs at my marina (TMR Marine Lake Conroe, TX) do the work. The total cost is only going to be a few hundred bucks (300-400) with parts. Yep mine sounded just like yours did. The knock increased in rhythm with rpms. Oil and water pressure was fine though. I am not that mechanically inclined when it comes to engine building so maybe someone else who is will chime in.

If you have a rocker/pushrod issue the rocker arm should be loose on the stud, but only when the lifter is on the base circle of the cam. Check for a loose rocker and pushrod on each rocker, then turn the motor 1/4 turn by hand and check again. Repeat this for a couple revolutions and see if you notice a rocker that is more loose than the others

That sounds just like my old motor right before i slung a rod out the side of my block...............just kidding probably just need a valve adjustment.

Use a mirror and look for a black sooty area around the exhaust manifold ports or just pull the exhaust manifold and replace the $10 gasket.

Well, I checked my compression today and am really scratching my head now:
fyi--I did the test on a cold engine

Cylinder:
2= 107
4=85
6=65**
8=105

1=110
3=75
5=95
7=75

This engine was rebuilt 2 years ago and only has 50 hours on her! I still seem to have good power but now have this compression issue and tapping???? What the hell!

You might wanna put it in the hands of a GOOD marine mechanic at this point. They probably see this all the time.

With those compression numbers there should be a loss in top end speed that is noticeable. Heck, it would barely run at all. Something tells me you did not do the test right.

I have to agree, time for a mechanic at this point