I have a 2002 BMW E39, the car gives a knocking noise when braking, which can be felt and heard from the front. Outside it is much louder than inside.
Could this be caused by a rotten brake dust shield?
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A knocking noise when braking (or during less noticeable maneuvers) can be attributed to worn front suspension parts - especially control arm bushings.
The image below is from some random heavily worn lower control arm bushings. As you can see, the rubber wears out and the connector in the middle is free to wiggle and knock around. Using your brakes puts a lot of stress on these bushings so it's more likely to be heard at that time.
Other symptoms, which may or may not be present, are a noisy clattering on a bumpy road, odd steering feel/behavior at low speeds, and pulling to one side when braking. Also, your alignment would normally be out of wack so tire wear may be uneven.
If you can get you car up on jackstands, a worn bushing is sometimes easy to see (depends on the car).
Click for larger image