A K321 has a simple "dipper" on the rod as it's only oiling mechanism.
The "local repair guy" MAY having been thinking about KT17's which are a twin cylinder and DID have oiling issues with the first series.
First, if it has breaker points (rather than non-adjustable EI) set the timing using a timing light and adjusting the breaker gap accordingly as outlined in the shop manual to rule out "spark knock".
Your knock could well be piston slap, though. Some other possibilities would include valves set too "loose", connecting rod/journal wear, or camshaft or crankshaft endplay.
Camshaft endplay is spec'ed @ .005" to .010" and they WILL knock there is not properly shimmed.