Knocking, Terrible Acceleration, & Stalling

My friend recently bought a car from a used car dealership. Beautiful as it was with custom body kit, paint job, rims and tires; it made a knocking noise and severely lacked power when accelerating.

1996 Honda Civic FWD 5Spd V-TEC

I figured that the timing was off and re-did the timing belt, new spark plugs, spark plug wires, distributor cap w/ rotor, O2 sensor, fuel filter, oil change w/ filter, and still to no avail. The top of the timing belt housing is missing and there is this black cylindrically shaped unit with a thumb sized black tube which goes to nowhere. It's not a vaccuum hose because it neither blows nor sucks so I don't know? Anyways when I start it it idels irratically from 250 to 1500 and stabilizes at 1000 then drops and does the whole bit all over again. If I tap the pedal it jumps then dies. If I take it for a spin it barely hits 40 in second gear and 3rd barely gets to 50 and so on and so forth while the pedal is floored. It did this not only before I re-did the timing but still persists. And during this whole trial it still knocks or taps or rapps or whatever based on the RPM gauge speed. I'm down to replacing the engine and just transferring all the new parts onto the new engine block. Any ideas? Thnx