I don't wan't to get too deep into this, but the GM knock detection can determine which cylynder is knocking by first, considering which sensor is triggering (front/rear or in later years left/right). Then, it will use the current crank position and firing order to determine the offending cylinder. It also can control firing events on a cylinder by cylinder basis.
As far as misfires go, understand that the PCM does not detect a misfire, per se, it only detects rotational speed variations between predicted firing events. So any condition that causes a variation in rotational speed can be viewed as a "misfire" by the PCM. It doesn't have to be an actual lack of or incomplete combustion.
I'm in no way supporting the techs claims, just wanted to clarify a few things.
I hope you get it figured out soon. These situations can be very frustrating.
Good luck.
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Jaime
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