A knocking sound from an engine is never good news, and no way in hell would I just ignore it and ride the bike. Something got put together wrong or doesn't have correct clearances, or you didn't replace a part that was worn out...whatever the cause of the knocking, it needs to be investigated. The alternative is to ride the bike and pray that nothing happens, and take the chance that your $150 top-end rebuild doesn't turn into a $700 complete engine rebuild just because your friend doesn't care enough about his bike to fix it correctly.
What the heck, it's his bike, just let him blow the thing up. Sometimes that's the only way to teach people that they're being stupid.