Spent an hour yesteday with the Rep and a Ford Engineer!!!!!
Piston Slap is the problem. As of April 15, 1999 the piston skirts were lenghthened on the piston. This slap is noticed on all motors 5.4L, 4.6L. Some more than others. They have done extensive testing and have found no effect on the Motors reliability. They even went as far as giving me an extended Warranty up to 100,000 miles at no cost to me. This issue has been a topic since 1997 and during the years 1997-1999 they swapped motors out. After April 1999 the redesigned the pistons extending the lenghth of the skirts. This did not solve the issue but ford has found no reason to change out motors at this time.

 

I had a skirt broke off on 87 f150 4.9 I-6. Thing ran forever like that, knocked all the time. It's prolly annoying as heck but more than likely will run for a long time. I pulled the pan off, the skirt was layin in the bottom there, I felt up in the cylinders, found the one. The cylinder didn't seem damaged or anything either.

 

ziggyz2, take the warranty and run. I've worked for a Ford dealer since 1984 long before the 5.4 came out and I've put several engines in trucks when the 5.4 first came out for piston slap which fixed none of them. I drive a 2002 with a 5.4 I notice mine has a little noise I'm not the least bit worried about it. The 5.4 is and has been a dependable engine. The Ford rep is just trying to satisfy your doubts about the dependablity of the 5.4 engine.