I had a mystery ticking in Valve train.Cost me an engine rebuild. Mercury had defective valve springs early 500 H.P. The inner spring broke and sounded like a sticky lifter. Finally dropped a valve . $6,000 dollars later. Good Luck.

I'm glad the noise is gone,(maybe) but doesn't it suck after all that there is no definitive answer as to what the problem was? I swear, boats and women.

There is a saying 'if it has tits or tires it's going to give you problems'....that needs to be expanded to tits, tires or props!

Tits, tires & tabs!!!

Took her out today and she ran flawlessly!! Thank god!!

Correction...she is running flawlessly BUT the tapping noise is still there. I am down slightly on power from last summer (4900 rpm vs 5100 rpm at wot) and hitting 60 mph vs 63 but otherwise it sounds and runs awesome.
I am scratching my head as to what to do at this point. Do I continue to run her? No one can seem to figure out what this tapping noise is...

Did you ever find out why the distributor had the damage?

No, according to Eastside Offshore (my shop) they said the tapping noise is clearly not coming from the distributor. I never found out why the rotor was damaged.

you need to find a qualified repair shop...
its hard for anybody to tell you whats wrong with your engine without inspecting it..

Find a repair shop that knows what they are doing...

The boat spent 2 weeks at Eastside Offshore with the owner, 2 mechanics, their engine builder and even had the factory mercruiser rep look at it. They are the performance boat experts in the Seattle area.
I also brought the boat down to a friends house and he had a good friend of his look at it who owns his own boat shop and is a 25 year certified mercruiser mechanic. Everyone said the tapping noise was coming from the bellhousing which is why we pulled the motor and the bellhousing only to find nothing wrong.

So this is not a situation where I havent had the boat to the shop.