Based on your model year, mileage, and sound indications, your timing belt is showing the signs of imminent failure. Until you can rule out the timing belt as the source of the problem, I strongly recommend that you do not drive your B5. I am not sure if you know what happens if your timing belt breaks: pistons ram into the unsynchronized valves, bending the valves, and usually damaging the head. Not driving the car and performing the following inspections may seem bothersome, but they will ensure you do not damage the engine.
If you are not comfortable working on car engines, take your B5 to a mechanic. Timing belt replacement at a dealer will run you $600, upwards. If the timing belt is the source of the problem, and you have a mechanic perform the work, have the water pump replace at the same time. The water pump is located directly behind the timing belt. With 75,000 on your B5, replacing the water pump concurrently with the timing belt will save you from paying the labor cost twice. I recommend a trusted VW mechanic in your area (possibly not the dealer; they are expensive). Post the question in the forum, I am sure someone will point you in to a good VW mechanic in your area. Have your car towed to the mechanic.
If you are handy with tools, there should be some inspections that you can perform to verify the source. A mechanics stethoscope should isolate the sound to the timing belt cover. Or, remove the upper timing belt cover and press on the timing belt. I am not sure if you can perform the second, upper cover removal, without removing the front fan and serpentine belt. Looking at the procedure in my Chilton manual, you may be able to remove the upper timing belt cover without too much interference removal. The TB replacement kit costs $170 or $270 (depending on the kit you desire). There is a write up in the info forum. If you do not have a Chilton or Haynes manual (~$16.00), I would buy one. They are not as good as a Bentley, but they will get you through most light to medium jobs. The manual will pay for itself after the first minor job you perform.