Well, I pulled the engine and brought it in to a local shop. They said it's the crank bearings, quoted me a price for putting in a new/rebuilt one. It was about 2X the price of a rebuilt engine from SBT. So I ordered up a engine.
I set out to pull off all the parts off the old engine and that's when I found the REAL reason the engine would not turn.
A small chunk of metal was jammed between the rotary valve and the intake port on one of the cylinders! It must have been in there for a while as the surface of the block where the valve spins and the surface of the intake manifold were pretty gouged out and it finally got jammed up just right to cause the loud clunk!
Well, now I have a new engine coming and a pretty chewed up intake manifold and rotary valve - any one have a used intake manifold and rotary valve for a 1991 sea doo GT 587 engine?
I guess I could sand it down a bit, probably screw up the clearance though DOH!