1986 Honda FourTrax problems

Hi All !

This is my first post. I just bought a 1986 FourTrax in really good shape, from my wife's uncle. There are a couple of problems with it that may be major, but that doesn't freak me out considering the price I paid for it. They are as follows.

1.There is a ticking or knocking noise coming from the engine. He has had the valve's adjusted , but it came back.

2. The first thing I did when I got it home, I checked the oil. It was very low and appeared to be milky. I could smell an odour of gas on the dipstick. Thinking the knock was obviously related to low oil, I filled the crankcase, but the knock did not go away. What would be the cause of this ? In my younger days I drove a 250 Big Red, serviced it regularly (you couldn't kill that engine if you wanted to), and never ran into milky looking oil.

Please Help !

Thanks
Scotty