These engines act weird with a timing ling when reving them up. It will go all over the place. It's hard to check the advance unless you have a good scan tool ( about $3000 from Snap-On). My 5.0 88 Mustang has always done this.
It sounds to me like you have a bad ECM. My mom's Olds did that. It would retard the timing because it said that it was receiving a signal from the knock sensor (even when it was unplugged).
I replaced the ECM and it runs like a new one.
It sounds like that portion of the ECM may be faulty. You can get one from a junk yard, but take your old one to match up the numbers. There are different ones for different trannies and calibrations.
Jimmy