174k mile LS1 with a bad lifter....
Really? What does the ATF do? Free up a stuck lifter? Are you saying the dump ATF in and run it for a bit to see if it changes the sound of that the ATF will actually fix the lifter. I'm assuming you mean to use ATF as a diagnostic tool.
I'm afraid the cam might be damaged from the bad lifter (if that's what it is).
I think the plan is to drain the oil into a clear container and look for metal. Then pull the valve covers and go from there.
So, it's not the bottom end. The car has driven nearly every day for 6 months with this knock and it's not making metal. If it was in the bottom end, there's no way it'd still be running. It's probably a failed lifter.
The Best V8 Stories One Small Block at Time



One of the good lifters

#7




New used block

Hard to believe it's got 150k miles on it.





Fixing the old engine.



Pretty easy fix though! Tach is working, engine starts easier and oil pressure gauge still works.
Tuning to come! I'm anxious to see what kind of numbers it makes with a small cam and the stock manifolds and cats.











