Knocking noise - Peugeot 106

Was hoping someone could give me an opinion on a knocking noise that i am getting from the engine area of a 1999 Peugeot 106 - 50,000 miles on the clock. Recently i have been hearing a knocking noise coming from the engine area (hard to pinpoint where exactly it is coming from), it has gradually got louder and is becoming more frequent. It doesn't happen when i put a full steering lock on or steer round a corner (rules out bad CV joint???) and mainly happens when i am just driving along. It also doesn't happen when i drive through a pot hole or over a bump in the road and i have never heard it when the car is stationary.

I had my car booked in for a service with the local garage last week and they diagnosed the problem as the gear box being on its last legs. The mechanic said that he'd had similar experiences of the problem in the past and claimed after their inspection that the back plate on the gear box was grinding. When i went to pick up the car they said that i would need a new gear box, driveshaft and clutch plate at the same time which would cost approx £600 to put right.

In order to get a 2nd opinion, i asked another mechanic (friend of the family) to look at the problem as i wanted his opinion on paying £600 for the repair work on a car that is worth perhaps £1,000 - £1,500. He took the car for the day and drove it to and from his place of work and said that he hadn't heard the knocking noise once. He also did a thorough inspection of the driveshaft and said that everything was in order - no leakages etc. He also said the noise wouldn't be a dodgy gearbox as that would make a whining noise when it was on it's way out and not a knocking noise.

Does anyone have any ideas about what the knocking noise may be? It is still happening on a daily basis so want to get it fixed before it possibly gets worse.

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