Our 04 Prius makes a really scary metallic noise at the top of the engine when it is engaged. All maintenance has been performed within 100 miles of the warning light. We are the original owners and the car has 160k miles. No pulleys are touching their surroundings. Make no mistake, this a LOUD noise that has been growing with time. No warning lights,,,oil level is fine,,,and no metal visible on the dipstick. Sound is originating at the top of the engine and is not a "knock". It is more of a metal on metal type of noise. Hopefully someone knows what is could be and not what I feel it is.
Try the easy things first. The GenII has a belt to drive accessories. Try removing the belt and running the engine for a few seconds to see if the noise goes away. Don't run it for more than a few seconds without the belt or your engine will overheat. If the noise goes away, check the idler pully for roughness when turned, noise or looseness. A lesser possibility is the water pump if the noise goes away when the belt is off.
Still unknown? If not external to the engine (also my first guess) I would take off the valve cover and check as you say, the top of the engine.