Responding --
First, the rod bearing...can indeed cause that knocking noise. You mention a compression test -- even though the compression is good, the bearing(s) can be scored or worn. Having good compression just means that there is no valve train leakage and no cylinder damage that would cause a loss of pressure.
I'm not a very big fan of making repairs to rod bearings to an engine as a stand alone operation. Usually the damage is also to the crankshaft, and replacing the bearings alone yields another failure very soon.
Purchasing a replacement engine is probably the most cost effective method of repairs.
In the end -- get a second opinion! Or third. Or fourth. Get some comfort with a local shop that you can depend on...that will work with you.
Good luck!