'87 Merc issues.. knocking

I just got done with my 4 month project of redoing my '87 bass tracker with the original mercury 35hp, motor has run excelent for a year up until two days ago, took it out, and the started made an odd grinding sound when i let off the ignition, and ever since it makes the noise every time, and on the same day the motor has developed a knock. its about two knocks with a second in between another two knocks at idle, and only gets worse when in gear and higher rpm, the knocking has gotten much much worse, and now the motor wont idle without raising the rpms. flywheel has no play in it, and gas/oil mixture is correct, spark plugs are new, great compression, i dont know where to start with troubleshooting.

Sounds like the main seals are leaking and the rod bearings are bad.