Checked ASD CV joint. All good. Removed Drive plate and flywheel No visible signs of damage. Going to replace drive plate. Old one was a low HP version. Had transmission checked. All good with that. Hopefully sound goes away after reinstalling everything. If not, going to drop in water and run it to see if it still makes knock in water.

Just wanted to finally finish this post to the end. The noise was coming from the Arneson Surface Drive top bearing closest to transom. Attached is a photo of the bearing completely rusted. Looks like the seals leaked and water made it to the first bearing

As the drive sits dry all winter, it could rust. I would change all of the bearings every 3rd year because the bearings are cheap and stock at most bearing suppliers.

You saved yourself a ton of money in possible chain break and other possible problems.

Agree with being proactive on bearing/seal replacement. It actually wasn't difficult to do. I did replace all bearings and seals, even though the top bearing closest to transom is the only one that had rust. A couple of dollars now prevented big dollars later.

Mark, I see you sold your boat. Good deal. Wish I could have been the buyer, but just couldn't swing it right now. Any plans for another?