A complete nightmare: shop rag left in intake

@CodaMan, I don't mean to hijack, but on option 2- couldn't he remove the pan, rod cap , rotate the crankshaft journal "to the side", and pull the piston and rod out the bottom end?

I haven't had the 4.0 apart, but in most cases you cannot get the piston past the crank even when it's rotated. Plus it's really hard to get in there to compress all the rings by hand when putting the piston back in, but it may be worth a try.
 
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I am pretty sure you aren't getting the piston passed the crank, and most likely the piston will have to come through the top. But in any case if the wrist pin is making it knock, the cylinder will probably need to be bored. Since the head is basically new, my advice is just finish it with a new short block and be done with it.
 
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