Scott:

In examining many computer adjusted spark timing schemes, 2400-2600 RPM and 21" - 24" MAP generally yield about 25 DBTDC for engines with a compression ratio (CR) below 8.6:1.  Higher CRs suggest a reduction in the base spark advancement regime (retard or later than 25 DBTDC), as do very high power settings so that the optimal cylinder pressure is reached at the right time.  Likewise, low power settings suggest advancing the spark for the same purpose.  Lower power settings are frequently reached by flying at higher altitudes (say above 8000 MSL and Wide Open Throttle or WOT), where even high CRs can't completely compensate for lower ambient pressures.  Note that induction pressures are maintained by engines equipped with superchargers or turbochargers and have low CRs. So, in discussing only normal aspirated engines:

As best as I can tell, the reason TC'd engines have historically had lower compression ratios was to maintain the detonation margin. That can be better accomplished by the addition of intercoolers and keep the higher CR. That results in lower TIT values and a better BSFC.
 
Do timing changes increase HP?

That depends. It depends on where the thetaPP starts before the timing change. Keep in mind that it is well accepted that the optimum thetaPP for max HP production due to mechanical considerations is about 16dATDC. Take the fixed timing (25d?) compromise. The takeoff power thetaPP might be at 10dATDC. A timing retardation during that regime to move the thetaPP back toward 16dATDC would result in more HP, less heat and less pressure. More HP and less stress on the engine. Now consider that we are in cruise in the same engine at a modest 70% and LOP. The thetaPP may be as far as 25dATDC or more (results in cooler CHTs). Advancing the timing would result in more HP output as the thetaPP moved forward, more toward 16dATDC. So, in essence, timing changes can improve HP output. Which way you move the timing depends on where you start. <g> Pick any power where the thetaPP is at 16dATDC, and ANY change in timing, advancing or retarding will decrease HP output. The problem is that to do this, you really need a closed loop system that MEASURES the thetaPP and adjusts the timing accordingly. This is only marginally successful when you calculate the thetaPP. I only now of one system that is capable of measuring the thetaPP in real time and adjusting the timing on the fly--PRISM. Computer mapping is only a guess. If one maps for anything other than thetaPP and peak pressure, there are potential problems.

The engineered timing on a fixed timing engine is a compromise between placing it as far forward as possible and not blowing it up at max power so that it is not too far retarded in cruise. Neither situation is optimal but both survive.
 
Do timing changes provide more efficient fuel consumption?

Based on the answer above, yes, as long as the thetaPP is not AT 16dATDC then you could improve the HP output for the amount of fuel being burned by dithering the timing to result in a thetaPP of 16. That improves BSFC.
 
At low power settings, (more importantly, high altitudes Wide Open Throttle), spark advance can better utilize fuel burned in the cylinder.  Thus, higher CHTs, Lower EGTs and lower fuel burn for the same or more power (again, trying to reach optimal cylinder pressure).

YES, generally a good assumption.
 
BTW, without going into the circumstances, my original IO 320 ran for 20 hours on magnetos with less than optimal timing - when finally measured, it was 34 DBTDC.  Yes, it ran hot and rough, rationalized as symptoms of a new engine.  There was no evidence that the engine was damaged. 

That is a very strong indication that you had a very tough engine!

Walter