When I removed the one head bolt there was a bunch of goop on the bolt threads "guessing a combination of oil,gas,coolant mixed" can't really describe the smell of it other than crud smelling.
I believe it was the bottom right bolt. And the one head bolt on the bottom middle had sand or something on the end of the threads?
The spark plug was also soaked in the crud stuff as well.
The side that had the knocking noise "driver side" was the cleaner side.
And the passenger side was the mess with the crud.
I had the same issue on two different outback that I bought. I ended up tearing the entire block apart and found a spun rod bearing and it destroyed the crankshaft journal, hopefully not your case. the head gaskets started leaking causing water to get into the oil and took out the bearings.
To me it looks like the crank shaft counter weight has been rubbing against the block, which isn't a good thing. I'm not an expert yet, but I think the bottom end is pretty much no good at that point. Hopefully someone else will chime in with more knowledge than me. I think the crank shaft seats are worn allowing the crank to move lightly forward and back which could be causing that rubbing we are seeing. Just a guess though! please let us know what you found!
I actually don't think that the block is cracked. those marks are where the two half's of the block mate together and possibly excess sealer and usually the factory machines the block where the counter balances rotate to give a little more room for excess crankshaft end play. I have three blocks torn apart in my shop and they all have the same markings like in the pictures. once you tear the block apart you will probably find the bearing have spun, that's usually a common thing with the metal you found in the pan