High compression timing issue.

It's specs say "10:1" with cast iron heads? Do you have any specs on the cam in the motor?

With a loud exhaust, bigger cam, and/or vehicle with interior noise, you may not be hearing the knocking while driving.
Will update when I pull covers tomorrow. Here are cam specs for

Cam Type: Flat Tappet
.545 Intake .545 Exhaust
241 Intake / 247 Exhaust duration
@ .050 - 110 degree lobe separation