Hmm, that sounds similar to mine, but I don't know how to tell if it's coming from the bottom of the motor or what. It does sound loudest right around 1000 - 2000 RPM though. Any idea how he could check for sludge w/o pulling the oil pan?

I've found pulled X motors on ebay in the $1,200 - $1,500 range, so I figure I'll go with that if worse comes to worse and warranty doesn't cover it...