Ok I got some footage for you guys. Its hard to see with the flywheel on but I cant find my 7/8 socket so I haven't been able to get it off yet.
Here's a link to a video series that deals with the same problem on an old Briggs:
Hallaran's Channel - YouTube
The problem is that the bearing that goes around the crank is worn and allows up/down movement of the crank. This causes the flywheel to wobble and collide with the metal which caused the noise.
here's a pic of the area we are talking about:
here's a close-up of the scoring and cutting of the metal (hard to see in the pic but trust me its been ripped through)
needless to say when that flywheel hits that piece of metal it becomes very hard to turn the motor over as its causing friction on the flywheel. Here's a video showing the up/down movement of the crank:
[YOUTUBE]
6.5hp clone problem - YouTube[/YOUTUBE]
So I'm pretty sure that is the source of the sound I was getting and I just hope that it is as simple as replacing that bearing that goes on the crank.