Re: 100% Proof that liners are moving at 'normal' operating temps & causing the tapping!
Anything's possible.
However - what does overheating actually do? it doesn't magically change the propeties of alloy to grow, (and stay at this increased size) by a certain percentage in a uniform direction (radially outwards from each cylinder bore) whilst retaining perfect concentricity of these bores...
If these things were designed to slide freely, and now they don't because the block is slightly twisted, would make sense.
But to say the situation seen here is because the block was overheated, simply suggests to me that your buddy hasn't thought too long about the basic engineering or metalurgy fundamentals behind his comment
From my own experience of the engine - it had all the original hoses, rad, thermostat, hose clamps, water pump, etc. There was nothing in there that suggested to me that there was anything amiss. Also - has an overheated Rover ever not needed head gaskets? I am very confident that those heads had never come off before I got into it.
All I can suggest is that if anyone else has a spare block (ideally a 2003/2004) then stick it on your grill and see what happens - the more inputs the greater the knowledge.
Perhaps someone also has a spare (scrap) alloy block with iron liners from a different manufacturer - that could be a benchmark of how hot the block needs to be for the liners to slide out...