Wet looking but notoverly cruddy.
In this post with the photo of the combustion chamber, I can see a gap in the intake valve seat where it fits in the head (look at the valve and seat area nearest the edge of the chamber) and it looks like that intake valve may be in the process of burning too. The intake valve and the valve seat will need to be replaced... I can't tell if the head casting is damaged or not from here. That isn't the source of loud knocking though... just indicates the entire head will need some repair and refreshing.
If you have a good set of micrometers or accurate and consistent digital calipers you should measure the wrist pin diameter all along its length, the wrist pin bore at the top of the rod in at least four places, the cylinder bore in several places throughout the bore, likewise for the piston skirt... check side play and up and down play in the lower rod bearing and be fussy about checking that... its important that you don't miss something or make any measuring mistakes. The service manual has component sizes and tolerances for every one of the parts you'll measure and in many instances shows you where to measure.
You haven't found the source of knocking yet... if you need a machinist to check everything for you you can go that route at this point... but unless you know of an old time craftsman machinist in your area, odds are you'll be wasting time and money on someone's incompetence... and no, good machinists don't work at dealerships or auto parts store machine shops, just the way it is nowadays.
Good luck and have fun with it!