Valves should be adjusted at 60K but I have never done it and the Workshop CD does not describe it. A deep engine knock is bad and may indeed indicate a failing engine (spun rod bearing is most often the cause) and should run more like $5K. If it is indeed upper engine, any certified shop should be able to diagnose and repair properly.
I will be in LA Mar 2-5th if you would like me to take a look at it.
BTW, my email address is visible if anyone ever wants to contact me directly...