I'm thinking if it's steel and not a bearing, it can only be one of a few things that rub. Those being the camshaft's distributor drive gear, the oil pump (sounds silly I know, but possible), timing chain, camshaft lobes, and rocker arm pivots to name the most popular spots. I can't imagine the valve guides would cause that kind of powder to form. Were the heads thoroughly washed before they were installed? Also, the oil filter has a bypass valve in it, so it's entirely possible for particles to get up there. I think you're going to be looking for a new engine soon to be honest. All that metal flying around does about as much good as tossing in a handful of sand. Something's grinding, so I think you'd better start taking things apart gradually until you find a bright shiny spot. Good luck.
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Capri306, Moderator, The Mustang Works Online
1979 Mercury Capri, 5.0L -- C4 -- 2.73
1987 Mustang LX Notch