Replacing Bent Rod Hydrolocked 3.0L M54

I just bought a hydrolocked 2002 330I sport pkg, 5 speed, silver, sunroof, loaded, 91k miles. I will have about $2,100 in it before I begin repairs. I know the cars history and actually persuaded the PO to buy this car.. I love BMW's in general and this is a really sweet one!

I have a lot of experience with performance builds.. mostly big domestic v8's in muscle cars. I am not scared of the M54 3.0L but have no experience with these engines. It has a steady knock that is likely the bent rod tapping against the block skirt. I killed the cylinders one by one.. no change in noise, pulled all the plugs and could still hear it tap lightly as my helper cranked it.
So I checked compression across all 6 cylinders and found:

#1-115 psi
#2-120
#3-95
#4-130
#5-125
#6-120

My guess is #3 rod is bent and knocking with a possible slight bend in #1.
My plan is to buy a good service manual and pull the engine for a partial rebuild. I have a good shop space with air tools but no lift so I would think I could block the car securely about 3 ft above the floor and pull the engine out the bottom (something I have never done).. stick it on my stand, repair damaged components, re-install with a new clutch and good to go!!

What am I missing?

I think i have the same thing on my dad's M3. my sister drove thru some deep water and it has CAI! was it difficult? expensive?