[misfit41]

I havent built a small block,but .003 sounds way to tight to me in general,especially if that is at the skirt,I would bet you will have piston scuffing causing the knock.
I dont have the specs in front of me,but I am thinking for a high performance application,it is more like .015-.020 total piston clearance.
Maybe some good engine guys will reply to your post,I know how you feel with no replies,try a thread that ditches someones car,or bickers about something if you want lots of input,when you really need help about something legit,not many wiill take the time,it isnt juvenile enough I suppose.heheh
good luck and happy New Year to all,,Tim k