****UPDATE****
I think we found the problem, it looks like the #1 piston is hitting the head. The faint valve marks I could see in the borescope turned out to be the edge of the valve recessed pockets.
We're going to raise the motor, pull the oil pan, and remove #1 piston/rod assembly to look at the bearings. Hopefully the crank is still in good shape and we can just buy a used rod/piston, or have this rod rebuilt.
There is enough wear that #1 cylinder at TDC is about .020" below the deck surface, whereas all the other pistons protrude a few thousandths like their supposed to. What this means to me is that when the motor is running, #1 is loose enough to protrude past the deck far enough to smack the head. When the motor is cold, the oil is super thick and the piston is cold and "not swelled". After running a few minutes, it gets warm enough to make contact.
I'll bet we could get the knock to go away for a while with an oversized head gasket, but it would only be a matter of time before the connection rod assembly gets loose enough to make contact again.
This is #2 piston for comparison sake as it looked without cleaning:
The next two pictures are the head @ cylinder #1. All of the valves and seats visually look in-tact and correct.
Cylinders #2-6 look great, perfect cross hatch, no signs of wear. Cylinder #1, however, pictured below has signs of wear up near the top. I assume this wear is from the piston hitting the head and wobbling a little till the slack in the bearings or piston pin or whatever is taken up and piston starts travel down. None of the marking can be caught with your fingernail or even felt by hand or with a tool, but you can see the discoloration.
I assume this will hone out when we do an "in-frame" rebuild of cylinder #1.
For these pictures, the piston was cleaned with a shop rag and a little brake cleaner. This is at #1 TDC and you can see that the piston does not protrude. #6, the companion cylinder protrudes roughly .015" if I had to guess, far enough to feel with your bare hand or finger nail. This along with the wear on the top of the piston between the valve relief pockets lead me to the diagnosis that #1 has vertical slop and is hitting the head. The other 5 pistons have legible factory markings, #1 is only legible in the valve relief pockets where it can't make contact with the head.