Help! Small block 360 has a knocking sound

With the Distributor cap off with the rotor on, you can put a socket with a ratchet on the big bolt on the end of the crank at the pullies. See how many degrees you have to rotate the crankshaft before the rotor on the distributor starts to turn. Clockwise, counter clockwise, see how many degrees. If excessive can help zero you in on your problem.

Also what does the transmission fluid look like when you wipe the stick on a white paper towel, nice and cherry red or dark brown and burnt smelling ?? Could be issues at the front pump of the trans just behind the torque converter, things getting wore out . . . So yeah someone asked what does it sound like when you put it in gear, better or worse ???

The tranny fluid looks fine, nice and cherry red like you mentioned. When its in gear, the only difference is that it gets slightly quieter idling, which is probably just because the RPMs go down slightly as you put in gear as well.