Update on this: Mike had disassembled the injectors to clean them. Disabling injectors #1 and #3 (also tested by unplugging #3) would cause a loud knock.
Balance rates were all -4 except #4 and #8 which were +12.
Mike found a shim sitting on the workbench, so he pulled the injectors back apart and found #2 was missing the shim, causing the injector to leak fuel constantly. Put that back and it runs fine.
Never done much with the LBZ, but I find it strange that disabling #1 & #3 caused a knock, the bad balance rates were on #4 & #8, but the actual problem was #2. In my experience with LB7s things track a bit more consistently. That said, having an injector leaking that much fuel was probably throwing the ECU (and us) for a loop.