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Here's what I'd do if it were mine....

a) Warm engine cranking compression test, Fully charged battery, throttle blocked wide open. Acceptable range 130-170 psi, no more than 20 psi difference between highest and lowest cylinders.
a1) If acceptable readings can not be obtained, rebuild is indicated.

b) If compression test is acceptable, drain oil and remove oil pan. Inspect main and rod bearings for wear. If the wear is not relatively uniform over 2/3 or more of the surface (less wear near the parting lines) then check clearance with a PlastiGage.
b1) If wear is abnormal or clearance exceeds .0025" for mains or .0026" for connecting rods then a rebuild is indicated.

c) If bearings and bearing clearances are acceptable, remove valve covers and check lifter movement at the rocker arm with a dial indicator and compare to specification for the camshaft being used. For a stock 289 2v/4v camshaft you should have no less than .2253" lift on the intake valves and .2325" on the exhaust.
c1) If specification can not be obtained a rebuild is indicated. Also, check rockers, fulcrum balls and pushrods for damage and wear and if adequate lift is obtained, correct as needed.

d) Remove water pump, fuel pump and front cover and inspect timing chain and sprockets for wear.
d1) If timing chain slack is outside specification (0.5" total at mid-point on slack side of chain) replacement of the chain and sprockets is indicated.

e) If everything, so far, is acceptable, you should have found the source of your noise. If not, and you suspect it may be a noisy lifter, remove the intake manifold and lifters and check them for bleed-down. The acceptable bleed-down rate is no less than 5 and no more than 50 seconds to bleed down 1/16" under a 50 lb weight with a 5/16" ball placed in the lifter cup. There is a special tool to check these (yes, I have one....) that looks like THIS.
e1) If any lifters don't meet specification, disassemble, clean and re-test. If still unacceptable, replace. You must break-in the new lifter as if breaking in a new cam and lifters. If you see wear on the lifter feet and/or more than one lifter needs to be replaced you should consider replacing the camshaft and all lifters.

Okay, so assuming a rebuild is indicated I would remove the engine assembly and disassemble down to the "short block" (block with crank, rods and pistons still installed). I would bring this to a good machinist who will remove the cylinder ridge, remove the pistons with rods and crankshaft, measure the cylinder bores for size, eccentricity and taper and recommend an overbore size, and inspect and measure the crankshaft journals to determine if a polishing or grinding and polishing to underside is needed. You can also supply them with the cylinder heads if you wish to have them inspected for valve and valve seat wear, stem to guide clearance, pressure testing (Magnaflux if iron) for cracks, etc., and estimate repair.

Depending on the machinist estimates you can make a decision as to whether it makes sense to rebuild the existing engine or to replace it. One of the more common alternatives to a "crate engine" is replacement with a late-model 5.0 from a '97-1/2 & up Explorer/Mountaineer. Many of these engines have little wear and may need little or nothing in the way of major operations.... some might benefit from a new set of bearings but most won't need a thing. A new oil pump pick-up tube for front sump and the installation of your original 289's oil pan, front cover, valve covers, intake manifold and carburetor, exhaust manifold and a few other "conversion components" can have you back cruising for few bucks. This thread might be "enlightening". lol. Got my GT40P up and running in my 66
 
Second - I have a hard time believing the cost to do a stock 289 would be over 4k. Maybe I'm out of touch and maybe this is based on you're location but I call BS. I would at least start making calls and doing some shopping to make sure.
You need to check on parts, machinist and labor rates... Even a "stock" rebuild where the engine is ready to drop in and fire up will be at least that.
 
Unless you're looking at something on Summit that I'm not seeing, there's only one 302 ATK crate engine that I see as currently available, and that's for over $6k. The rest all show as not in stock and almost all of those say "This product cannot be ordered at this time. Future availability is unknown. We apologize for the inconvenience." Which to me isn't very reassuring and might mean that it could be available tomorrow, next month, a year from now or maybe never. I'd look elsewhere for a crate motor that's actually in stock and ready to ship so that you at least have something to compare price wise to doing a rebuild. Also, what's your budget, time frame and do you have any horsepower goals or are you just wanting a cruiser? Being 4-6 months out from even just starting to do an engine rebuild would be a hard no for me as I would want to be able to enjoy driving my cars throughout this summer, which 4-6 months from today would put you at around July-September 8th. And that's just to start the project, who knows how accurate that 4-6 month figure it, how long they'd take to rebuild the motor, if the parts were all readily available and so forth.
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...new double-platinum plugs...
Huh? OEM-type ignition coil use a COPPER plug.

First thing is to do a real, ground up tune-up of the engine. A compression test is pointless unless you have adjusted the valves.
Unless somebody has messed with the valves, there's no reason to do a valve adjustment. In fact, you'll risk giving the lifters too MUCH preload which WILL lower compression where a bit of looseness will have almost no effect. Do the compression test first to establish the engines ability to pump air. Make sure the engine is warm, the battery is fully charged, and the throttle is blocked wide open. If the results come back consistently low, squirt a bit of engine oil into all cylinders and re-test. If the numbers improve significantly (like 20 psi) then you have poorly sealing rings. If the improvement is nil then you have leakage past the valve(s). If you have any cylinder that is more than 20 psi lower than the highest cylinder then there's no need to go further, a rebuild is indicated.

You can use the compression tester's "adapter hose" attached to an air compressor to charge the cylinder with air (watch out, it'll drive the piston down and spin the fan blades) and you'll be able to hear where it's leaking. From the carburetor indicates an intake valve(s) is not sealing properly. From the crankcase (oil filler cap) indicates rings are not sealing properly. From the exhaust pipe(s) indicates an exhaust valve(s) is not sealing properly.

Sure, you can to a "complete tune up" to an engine that is in poor condition and it will make it run a bit better..... for a while, but it's not going to correct an engine that is basically in poor shape.
 
Has anyone here rebuilt their engine on a budget at home? I imagine if you have the tools and expertise you could do it for a few hundred bucks in seals/gaskets/bearings, no? Like just a simple drill hone to crosshatch the cylinder walls, clean it up and new bearings? I was thinking of doing that with a new comp cam
This depends on whether the wear dimensions of the block, rods, and crank are within "serviceable" dimensions. If the bores are out-of-round, tapered or exceed the maximum diameter specification then no amount of honing is going to suffice and the bores need to be machined oversize, if enough cylinder wall material remains.... if the final cylinder diameter is going to exceed 4.040" (or 4.060" with sonic checking wall thickness) then sleeving or block replacement is indicated. The same with connecting rod bearing bore diameter (or if you want to change rod fasteners)... if the rods aren't square, the bores are tapered or out-of-round, the rods need to be resized. Crankshaft journals have an acceptable specification before machining to an undersize is required.

There's nothing really wrong with a drill hone..... when properly used.... but not as a substitute for machining.
 
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