This investigation deserves its own thread.
The best approach to engine noises is Noz's systematic one: how is the noise linked to engine rpm?
Once you have that established, try the "long stick" diagnostic tool to pin the location down. Put the clean smooth end in your ear and the dirty end against (1) the cylinder head, against all 4 cylinders (2) mid-engine ditto, and (3) the sump ditto. That should let you locate the noise pretty well and you can then find out exactly what causes it/cost of repair/ etc/etc by asking your local mechanic.
It doesn't sound like hydraulics - although it might well be a hydraulic tappet in the cylinder head (my guess).
Hope that helps.
Wendham

Thank you Wendham,
Following your suggestion, I located the noise somewhere in the lower part of the engine, real close to the firewall.
XM in the shop for the weekend. Will update you as I learn more...
Have a nice weekend you all,
Mauricio

Mauricio, hope it goes well for you. A diesel-like clatter low down on the engine sounds unusual ...
Wendham

The clatter saga seems to be coming to an end.

After two different mechanics saw the car, hydraulics were ruled out - it's the engine. The jury was out on what specific engine problem was the culprit: one said valves, another said cylinder bearings.

I am just coming back from the third mechanic, a small outfit specialized in Citroens here in Lithuania - where I am currently residing - and they tell me they are positive it is the crankshaft bearings. At any rate, the three mechanics agree that whatever the problem is, the cost of repair doesn't make economic sense and they recommend buying a used 2.0 XM petrol engine instead.

I have found one in the newspaper, totally overhauled 6 months ago by the same Citroen outfit, for about 375 euros. Add up about 175 euros for installation of the replacement engine, and the clatter should be gone courtesy of 550 euros, hopefully by the end of next week.

Tip: should you need parts for XMs, petrol or otherwise, do send me an e-mail and I may be able to check the local prices for you. Seems that a lot of XMs have been coming this way and spare parts are priced competitively.

Thanks to noz and wendham for their follow-up and their valuable advice.

Mauricio