Valve stem seals usually denotes the smokey issue, the knocking if it increases from say tick over, to 1500/2000 revs, then you are looking at the bottom end bearing, where a rebuild is required. Decent engines can be sourced for around £1200- £1500 depending condition and mileage, however a compression test is advisable. Engines can be fitted around £800-£1000. Hope all goes well.