Before you start throwing parts in a shopping cart, pull off your valve covers and turn the engine over manually using the harmonic balancer bolt... Check each rocker for one that obviously has way too much play. Much easier with the spark plugs out. You may find a collapsed lifter that way. You may find one of the trunnion bearings is toasted.
Or you may find nothing wrong at all. LOL, which is what I did last week.... At which point I checked my exhaust manifold bolts and discovered they were loose. (Yeah, in an LS!) It had blown out the exhaust manifold gasket underneath the manifold where you couldn't see it or feel the exhaust leak. It sounded 100% like a mechanical sound, just like a lifter.
But you say you have a power loss, some more likely you'll find the dreaded collapsed lifter.
Michigan Motorsports has the LS7 lifters with the gold clips in the end. I can personally confirm their genuine. Purchased from them multiple times. There's a lot of places selling what they call LS7 lifters, some call them LS7 style lifters..... Stay away unless they will prove what they have by showing an image of the gold clip in the end of the lifter.
I always use the felpro MLS head gaskets. ARP head bolts. (Not the studs, unless you're going for extreme horsepower) There's several sources online that sell the nice stainless steel bolt with a copper washer that plugs the relief valve in the oil pan. I typically use the Melling 10296 oil pump with the +10 psi spring that comes pre-installed. Suitable with or without VVT, if you wish to retain it. As for turning off AFM in your ECM, there's a couple options depending on your needs. You can send your ECM in for a nominal fee and they will deactivate AFM. Or, if you're looking to keep the engine basically stock and install a stock non AFM camshaft either with or without VVT, for just under $400 you can buy a Diablo predator that enables you to do it quickly. Plus you can adjust tire size, various horsepower ratings, tighten up the transmission shifting for towing or just for longitivity purposes, plus a lot more. If you're going for an aftermarket camshaft, you'll probably want to splurge for HP tuners that will enable you to fine-tune your engine to whatever cam you want.
A lot of options, depends on what you want and your intentions for the vehicle. If the chassis is in great shape and this is something you want to keep a long time, and you're not in a time crunch.... You might consider dropping a low mileage 6.0 in and spend a few dollars refreshing it. The 6.2 is doable as well, although quite a bit more money.... But for longevity purposes, I lean toward the 6.0.
Read up on the VVT to decide if you want to keep it or not. For a daily driver, it's very beneficial for low end torque and fuel mileage. Very easy to delete if you want to go with an aftermarket cam for a lot more power.
I would also advise you to stay away from the prepackaged AFM delete kits. You'll save money by piecing together the kit yourself, plus you know exactly what you're getting. The only kits I've seen that are 100% quality, tend to be Brian tooley racing and Michigan Motorsports. A lot of people will weigh in with a thousand different ideas of what you can do.... Because I really are a thousand different ways to do an LS engine. It all comes down to what your end goal is.
