In a diesel, the power balance is determined by fuelling, though the larger cylinder would have slightly lower pressure, but not enough to really notice.
If you are losing oil pressure, I'd check into the oil pump.

Is this with a real gauge, or the OEM (doesnt matter the brand, they are all junk) jukpile?
Timing and an injector can also make it knock weird. What RPM/ LOAD does it knock at? I am by no means saying you DONT need a rebuild, or that I am surprised (hey, these things are 15years old, that's a lot of poor maintenance), just throwing out simpler things to check first.
Daniel
His- 93 W250 club cab LE, auto to Getrag conversion, piston lift pump, 3.54 LSD. 400k+
Hers- 04 QC 4x4. Built auto, Triple Dog, Air Dog. Funny Round truck that aint so quiet.