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I recently went through very similar engine problems. Ok, does your engine has a knock sensor, maybe an 88 to 89? That would explain the performance loss, perhaps, the knock sensor could be causing the ECU to seriously retard the timing.
Two things can help you diagnose your issue more precisely. A thin walled metal tube. With it close to your ear, touch various areas of the engine and listen for the loudest return. Be careful of fanbelts. Ouch. The other thing is the frequency of the sound. At 3000 rpms do your hear the tapping, or knocking about 3 times a second? If so, I'd say you have a rod bearing going south. Fix it, before it throws a rod, while its a cheaper fix that is.
My engine is in a million pieces right now. It just needed a rod bearing by the way.
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