Knock and smoke

Have you pulled a head yet? Getting engine parts up top is very easy... I've had parts of the oil ring assembly wrapped around the camshaft on a running engine before and a lot of schrapnel up in the valley of ring lands.
A few notes: It's all junk until you completly disassemble the block to bare, and clean it all. If you can, post a pic of the pistons as installed in the block. Never, EVER use a used lifter unless it's off the used cam, and in the same order as it was removed. Used cams are fine, but you still have to either use the matched lifters from the lobes they came off, or new ones. NEVER mixed used ones.
Really sorry this happened to you...