I took my brothers se 400 machine in to be service for a similar problem; very loud knocking noice and thread wld do the same thing your machine is doing. I did as much trouble-shooting as I could. She gave me some great tips.
1. be sure to use brothers products only; (not sure if you are) I was using the bobbins from Walmart and they were totally wrong for that machine; be sure to use only the size bobbin for that machine.
2. the same is true for the needles; BE WARE of needles that state they are universal; I bought universal Singer needles and that was a big problem using with that machine
3. my bobbin case did have a burr on it, but the nice guy filed it down for me; problem solved! (burred bobbin cases can also be a indicator that the needle is knocking against the bobbin case; make sure it it as far as it can go in the needle holder; and that it is not bent.
4. make sure that your bobbin case is installed correctly; that was another mistake I was making. I wld test it on a scrap piece of material first to make sure that it is working properly
I bought my machine @ Walmart as well; the owner was kind enough to tell me that as long as I could bring in my receipt of purchase; (machine under warranty for a year; not sure about extended warranty) they were a authorized brother dealer she wld replace my bobbin free of cost to me and bill Brothers. My initial thought was the bobbin, but after they performed the above I walked out of there spending $8 bucks for the correct needles and bobbins.
I hope this was helpful.