Late timing for the conditions.
Ideal timing is based on rpm, and load. (However if the fuel mix is too far off, the burn rate will change - so its hand in glove relationship.)
In neutral, the engine will take a lean mix - which burns slower and likes more advance. But its inefficient and makes less power when the drivetrain is engaged than if a richer mix and less advance was used.
Upper end under load should need more energy to initiate and burn.
Sounds like its the advance may be used up. If running an advance like used in the MP race distributors, set timing at 2000 - 3000 rpm. If running a normal advance mechanism, the advance needs to be measured at every couple degrees from 600 rpm umntil it stops, and then a few high rpm. If its the original distributor, it may have a long but fast primary advance like was used on the early smogged engines. If that's what you find, set the timing at 2800 to 3400 rpm and live with the idle timing until you have a chance to shorten the slots on the inside.
See the explanations posted here:
CAP vs Non- CAP High Perf Timing Curves
Timing with a MP "Tach Drive" Race distributor
Obviously getting closer - its time to measure the curve.
Vacuum is a useful of efficiency under a given load - if you can hook up a gage or MAP sensor
Tune for performance. The WBO2 is just a way to keep track of how things change. At low rpm, with plugs that fouled, I wouldn't fully trust the WBO2 to be interpreting AFR correctly. Bottom half of post #81 is super good suggestion.
