Perhaps one of the shaft's retainers, the bearing, or gear is worn, allowing the water pump & shaft to move in and out of the case - causing the impeller to rub on the outer cover.
Try to pull the water pump out and push it in - there shouldn't be any play.
If there is, figure out why.
If the impeller can move in and out, that would cause it to knock.
If there were any metal shavings in the coolant, they would scrape the outer cover.
The water pump cover isn't an even shape, so I don't know what you mean by "should it be in the center"
The bottom end and the cooling system are 2 separate entities.
A problem with one will not affect the other.