Ian, it is definitely in the valvetrain. Greg brought up a good point about the rockers hitting the valve cover. But I would think that the valves would hit the pistons before the rockers would hit the valve covers--especially on a 5.3L with stock heads/stock ratio rockers/stock valvecovers.
PTV mayne! I heard that SAME noise on Dale's LS1 before it said bye-bye. But it wasn't that loud. You don't HAVE to take the heads off...you can just remove the cam and replace it with another one that doesn't have EFFIN .640 lift!!!!!! I can almost guarantee that you will see eyebrows on a few of the pistons if you take the heads off. You may have to look close since you spray and the cylinder heads should be clean, but even with that little of run time, you will see where the valves are kissing the pistons.
Sorry to hear all of that man. That just goes to show you not to listen to some companies when it comes to this stuff. I am not gunna say "I told you so" from when you had asked us about the cam issue in the other thread, but I told you so. :D
If I was you (someone who wants a big cam for a 5.3L that will scream on the top end), I would get a cam with a little more duration and just under .600 lift...like the
TSP Torquer v.2 cam. Trust me, I have driven a 5.3L truck with that cam and it pulls to 7000 RPM.