That looks like about 2 deg btdc.
The fact that retarding the timing helps does make me question the part of carbon in the problem. That said taking the head off to clean it isn't the most complicated job. You can also measure the combustion chambers and the piston bowl to be certain the compression ratio is as low as you think it is.
Yeah I just don't have a lot of time to take the head off right now.
So am I right in setting it at "5" on the wheel with the light to get it actually to 7 btdc? Or do I have that backwards