Odds are the knocking noise is the clutch basket, the ninja 250 PreGen and it's bigger brother have the same issue. It's nothing to worry about, as both of my bikes make that noise, and they have about 50k miles on each.
The CCT is on the clutch side mounted on the outside of the motor here's a link that, should help you out,
https://faq.ninja250.org/wiki/Cam_ch...sioner_removal
You can try cleaning it, I've tried to clean mine, but had to get a new one, and that fixed my Cam chain noise.
I'd say keep the motor you got for now, and check Craig's list for a doner bike, you can pick one up cheap, I've done this as well too. Because this is an, entry level bike, the get wreaked often, so you can buy one cheap.
Rebuilding these engines is different that a car, the head and cylinder need to be lapped, not cut!!!! Milled, etc... There isn't enough meat on it for that. Also the cylinder bore is also thin, so you can go too much over maybe. 005 over. Add to all, this the cost is parts, gaskets etc.... And you'd be better off finding another engine cheap.
If any member here is close by maybe they could help you out and take a look. Unfortunately it's the wrong time of year for me to make a road trip.
Good luck with whatever you decide to do.