Did the knock and the 'oil smoke' start at the same time?
No, the knock started earlier by a couple weeks. It seemed to get better when the bike was warmed up. It got a lot worse when the smoke started.
Noise change when pulling in the clutch?
No, the clutch doesn't change the noise at all.
If you put a towel over the exhaust tip, does the noise change? Can it be located easier?
I haven't tried this yet, I will do this when I get home from class tonight.
Is the oil level lower from oil burning?
Not by any noticeable amount, but I also haven't run it very much since this problem started.
Pull the spark plugs, which one has oil all over it?
I quickly pulled the plug on the rear cylinder and it had oil on it
Is the tapping noise engine speed or double engine speed? Double would be valvetrain, normal low end.
I'm not quite sure what each one would sound like. Sorry

Put a stethascope on your ears or use a large vacuum hose, go around the engine, do you hear exhaust leaks? can you pin point the knock?
I can see some exhaust coming from the connection between the muffler and the pipe, but I haven't had a chance yet to try and pinpoint it using your method.
If you disconnect a coil/spark plug will that cylinder get quieter(w the knock noise)?
Another thing I'll have to try when I get home.
Thank you for the advice, I'll get back to you with the other information as soon as I can.