The vacuum advance is advance only. If you remove the dizzy cap, and the vacuum line from the carb to dizzy and sook on it, you should see the points plate rotate slightly. If nothing moves the diaphram in the unit is goosed. You may also get a mouthfull of fuel so be carefull.
To check mechanical advance you need a timing light and check if the timing marks move apart (advance) when the engine is reved up.
If noise is worse on over run it might just be the timing chain.
Your compressions are spot on at 160 psi, but an oil pressure test will tell you a lot. Look for 60 psi when engine hot and doing 30 mph and 40 psi at idle.
Also, a sligth knock with power down, is also a sign the head gasket may be about to pop, or exhaust manifold gasket leaking.
Thanks MoggyTech, the exhaust pipe to manifoild joint is blowing slightly, so I'll check around all that, it's recently had a new copper head gasket, so I hope it isn't that
Easy test - retard the timing and take it for a test run to see if the 'knock' has disappeared. To check the mechanical advance - twist the rotor arm (anti clock) with your fingers - it should move and spring back when you release. It's pretty reliable though unless the dizzy has been lying around for a while. Vacuum advance - if when sucking there is air coming through then a new unit is required - but even if the diaphragm is not leaking the mech can still be seized. Most vacuum units over 10/15 years old will not be working properly now.
