Man your diagnosis was spot on, how did you manage to figure that out LOL.
I don't know how good every high school auto shop is, but I know the high school shop where I live has some really good kids in it who do a lot of their own automotive work, as of right now they seem to be doing a better job with my bronco 2 than the local certified mechanics many of which couldn't get the carburetor to work on it to begin with after 2 shops I said the hell with them and told them I wasn't paying them for screwing it up more, about an hours worth of messing around with the carb with one of the kids who's family I'm friends with, we got the thing tuned pretty good, once I got the computer disconnected it runs awesome now, just that initial knocking that suddenly occurred about a week and a half ago, scarred the crap out of me, I seriously thought great another major problem with limited income how am I supposed to replace the engine now. I'm so glad it was a flywheel issue, but I don't have a heated shop or garage to work in and at 3-5 degrees below zero for those few days it was impossible for me to even attempt to work on it myself. Since the bronco 2 is already basically torn apart now I'm having them do the rear main seal, new oil pan gasket set, and changing all of the fluids this week. Other than the rust issues and the previous owner tearing the interior carpeting out its still a pretty descent vehicle, I don't mind driving a beater around, saves me gas when I'm able to drive it plus its more fun because my newer truck has all the electronic traction control crap in it, so its absolutely no fun to drive, plus it doesn't get very good gas mileage in town, the Bronco 2 I was averaging around 15-17mpg in town after I got it tuned right. My truck I'm lucky to get 12mpg in town it does great on the highway running around about 23mpg but forget short trips around town with it LOL. Haven't had a chance to run the bronco on the open highway enough to find the highway economy but if I'm getting around 15-17 in town I can imagine at least 20mpg on the highway probably more given its a 5 speed manual.
If you are hard up on funds to do work on your vehicle's I would seriously give your local high school auto shop a try. I know my local high school auto shop kids love the work, gives them experience, and they get graded on participation here so the more they get to work on the better their grades and their experience level will be. The instructor won't let a vehicle leave without inspecting it himself and doing a short test drive in it to be sure they didn't mess anything up. I've had my Bronco into the school shop 3 times now, and they haven't let me down yet. The first time was just a routine service to kind of get the oil/filter changed as a way to determine if my thoughts were correct on a blown head gasket, the second time it was in they replaced both head gaskets for me and changed the oil/filter again. This time it is the flywheel and oil pan gaskets. The kid that's doing most of the work inspected the clutch and says its in really good shape so that's a plus he thinks it was changed not to long ago so if that's the case it should be good for me for many miles, I've never worn out a clutch I've had components fail but never have personally worn the clutch itself out.
If I would have had all this work done at an actual shop I would have been parking the bronco for many years as there's no way I could have afforded to have the head gaskets done or this flywheel mess fixed either. These boys have done a great job so far, and this week I should have the bronco 2 back home. They asked how soon I needed it and I told them to take their time and work on it when they could so they've been really good about keeping me updated on the progress, including the head gaskets well ok those the previous owner bought and never had installed but the oil pan gaskets, and new bolts for the flywheel I've sunk a total of $20 into the bronco and saved a couple thousand dollars in labor by having the high school kids work on it. I live in a small redneck town so there's tons of high school kids who love to work on cars around here. The actual mechanic shops after a mess I had with a previous truck I'll never trust the so called certified techs they have here ever again. They literally cost me a vehicle by not fixing what they messed up but it ended up costing them in the long run because the next person that got that truck ended up having major problems with it and luckily I got to talk to the guy so he knew what was up with it and made them fix it for nothing.