Knocking is generally bearing wear on the con rod. It could be a bad piston, that could be causing the blue smoke. Blue smoke is engine oil being burnt. It could be a cracked head too. Even injectors apparently can cause a knock, but it won't make for blue smoke.
I would pull the engine, remove the sump and check the big end bearings.
Sadly, as there is blue smoke, you may be up for a rebuild, oil is getting past the piston(s) and being burnt.
I hope its not too nasty.