Maximum timing recommendations hinge around what happens with full load and wide open throttle - so that is the method of set-up. This distributor is the later version with both centrifugal and vacuum advance I'll assume for now?The plan is to set up the intial advance - plus the centrifugal advance - to total something like 36°-38° when the rev's are high enough to give you the full amount. No vacuum line connected during this test - plug the line to the carb and leave the port to the vacuum pot open. Mine is set at 10° initial and 26° centrifugal to total 36°. The engine speed at which full advance occurs can be lowered by using successively lighter springs in the mechanical advance mechanism - so long as you don't induce the "spark knock" you are writing about.
In low load - no load conditions spark advance can go quite high without inducing spark knock - and the increase tends to make the engine lean out and use less fuel. That is the whole intent of the vacuum advance system - economy when full load is not required.