I could write a hundred pages on this one, because I have done a crapload of research and testing on it... So I'll try to make it brief.

There is a lot more in-depth information available, but I will just go over the important stuff here...
Basically, the so-called 'cackle' or 'fuel knock' is causes by variations in fuel pressure and flow in the cylinder heads. Many things contribute to the cackle, and I was surprised to find out what they were. The cackle is only present on the 99+ Super Duty and the 98+ E-series vans equipped with the 7. 3L DIT PowerStroke.
The first one is just plain stupid on Ford's part. The fuel supply system on the 99+ PSD has very poor connections on the suction side, both along the frame and in the tank. Their quick connect fittings do not seal properly, allowing tiny air bubbles into the fuel. The air bubbles are then churned up by the lift pump, and made even smaller than they were before. From the lift pump, they enter the fuel filter/pressure regulator, and then into the heads to be delivered to the injectors. Tiny air bubbles in the injectors can cause MANY problems... Low power and failed injectors are just the beginning. There have been documented cases where the cackle has caused major engine damage, including burned valves and ruined pistons. All of this from AIR in the fuel. So now you're wondering, "how does a little air in the fuel ruin an engine?" Well, as you know, the fuel running through the PSD is not only a fuel, but it is a lubricant as well. There are some very tight tolerances in the HEUI injectors, all the way down to about 3 millionths on of an inch. In decimal form, it looks like this: 0. 000003. This is the last place you want a lack of lubrication. So the air gets in the 'lube,' and causes injectors to overheat, seize up, and possibly self-destruct. It't the self destruction that leads to the damaged pistons...
Another cause of the cackle is variations in fuel pressure and flow in the heads. Lets go back to the fuel supply system for a minute. This one is going to surprise you... There are NO return lines from the heads back to the tank on the PSD. On the older ones, there were return lines... So combine the air in the system and no return lines, and what do you get??? You get air buildup in the fuel passages in the cyclinder heads. NOT a good thing!
The injectors use split-shot or pilot injection to eliminate the usual diesel idle clatter. Same thing as the Duramax. Pilot injection is a small injection of fuel a fration of a second before the main injection event. This is all fine and good, as long as you have a fuel system that can handle the pulsations in a pressurized fuel rail. What is going on in the PSD is fuel starvation because of these pulsations. Because of the lack of fuel flow (no return lines) in the heads, the injectors farthest away from the fuel inlet are being starved of fuel... That's why the cackle is mainly heard in cylinder #8. It's farthest from the fuel source AND closest to the driver.
Solutions? Well, it depends who you talk to. There are lots of different theories on what
should fix it, but there's on;y a couple that will actually work.
Ford's fix is to replace the number 8 injector with a purpose-built unit called a "long lead" or LL injector. The only difference with the LL injector versus the rest is the distance between the anulus (where fuel enters the nozzle) and the plunger is slighter longer. They did the with the hopes that the larger area would allow more fuel in prior to being injected. A modified computer program is needed to run this injector, and a reflash is part of Ford's "fix. " They figured if there was more space for fuel, there would not be a starvation problem. Well, they are wrong. The worst part is, the LL injector now comes in the PSD from the factory... If anything, the knock is worse on the trucks with the LL injector. I have heard dozens of them, both with and without the LL installed. Trust me, the LL does not work!
Now for the real fix. It's expensive, time consuming, and WORKS. *LOL*
The first thing to do, is rework the entire fuel supply system right from the tank. All the Ford connections need to be removed, and replaced with barbed fittings and hose clamps. Keeping the air out is the number one priority here. A new pick-up tube in the tank is also needed. Some fellas with PSDs have only had aeration problems on half a tank... This is because one of the connections was submerged until the fuel level dropped below the halfway point. So once the suction side is fixed, then you need to address the return line issue...
The stock fuel pressure regulator has to go. The return line will get used, but the factory regulator will be capped off. At the ends of the cylinder heads, there are a couple of little 1/8" NPT plugs where the fuel return lines are connected on a 94-97 PSD. Simply run a couple of 04AN return lines into a fuel-port regulator, and then run a 06AN line from the regulator to the factory return line. Set the regulator to 63-65 psi, and you're done with the supply system. If the truck has an LL injector already in it, it will need to be removed. It is easy to tell an LL injector, because it has LL stamped on the top of it, right on the solenoid body. So remove this injector, and put a regular one in its place. Or better yet, but an entire set of Diesel Dynamics injectors...

After the injector change, you'll need to have the ECM reprogrammed with an older version to accomodate the non-LL injector. Any Ford dealer can do that.
So what are the gains with the upgraded fuel system? For starters, a much quieter and smoother sounding engine. The PSD actually sounds pretty good once it has a decent fuel system. The return lines/regulator modification have also yielded more power and increased mileage. Some guys have gained up to 2. 5 miles/gallon!
Fixing the fuel system is the key to getting a PSD to run really good. The sad part is that Ford will never do it. They plan to continue their LL injector "fix. "
Well, sorry this got wordy, I tried to keep it as brief as I could. There's much more info available, let me know if you want some good websites to go to regarding the fuel cackle.
PS... Aren't you glad you have a Cummins?