A head gasket failure won't always yield water in oil or oil in water. If it blows in the small portion between 1/2 or 3/4 it will just loose compression and blow back out the carb. The flakes look like babbitt. You may have lost the center main or other.@ James: I am pretty sure that there is no leak from the exhaust manifold. The knocking sound is metallic hard. And a leak would increase the noise level by load IMO.
Head gasket might be, but I do not find oil the coolant or vice versa.
I will do the simple thumb compression test.
@Big Hammer: Did your engine suffer from the same ugly sound as ours does or did you discover other symptoms?
I am just coming back from the car where i took some videos of valve movement by hand cranking and some photos from valves and pistons. I will post them ASAP.
So thank you all for your support! Now I will have to find a good mechanics to to pull the engine and carry out the change of all rods. I cannot do this in my home garage..
Thank You
Gerald