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Hi, My Name is***** have over 30 years repairing vehicle experience and I am sure we can fix this together. What components did they replace for $300, Was it necessary for the timing belt to be removed? The cap you speak of should not have required removal of timing belt unless something else was damaged. Did you ask the garage what the noise was? I am concerned that driving it will make worse.
There is no reason that the valves should have stuck or bent. If they did remove the timing belt then they have installed it improperly causing your problem. Let me just clarify a couple of things here. Was the vehicle running properly prior to your replacing the distributor oring? When you picked it up it was knocking or before the distributor was removed? the biggest problem I see is that they did not hear car run before they fixed it.
Without hearing the noise it would be difficult to say. These are common for bending valves, but only when timing belt breaks or is replaced incorrectly. My suggestion at this point would be taking it to a different mechanic and explain what has been done. I am definitely thinking the shop that repaired it should be responsible, but without seeing and hearing it I cannot say for sure.
Your mechanic should not have just changed a cap without at least checking the cam bearing clearance for that bearing.
All OHC or DOHC heads are assembled with the numbered caps and then line honed correctly for bearing clearance.
That is why you have to fit the caps in the numbered order and you can't fit caps from another head without AT LEAST checking the clearance. I'd say the cam was tight in the cap and partially seized, the valve timing then jumped teeth, and now the valves have hit the pistons.
I have seen camshafts seize before and this is what happens.
Hope this helps.