I am guessing that your timing light is the type that requires a little adapter to be inserted between the spark plug and the spark plug cap and then you connect the light's trigger lead to that adapter? If so, it is pretty much impossible for that type of light to consistently falsely trigger early.
Your comment about having both advance and retard on the distributor was ..... confusing. To fix this I was motivated to find an internet copy of the service manual (in case you are ever looking for one):
http://www.240.se/litteratur/tp10868.pdf
Sure enough, the 164 does manage to 'suck and blow' at the same time. The specifications indicate that with the vacuum lines blocked the timing should be 10 deg BTDC with an idle speed of 600 - 800 RPM. The specification indicates that centrifugal advance does not start until 850 - 1050 RPM.
The specification for the centrifugal advance mechanism indicates a total advance of about 22 deg (at the crankshaft). At your idle speed of 800 RPM you should be getting no centrifugal advance. However, I am wondering if something has happened to your centrifugal advance mechanism, specifically I am wondering if one or both of the springs has broken which would allow centrifugal advance to commence much sooner than desired. The service manual is a little thin on details when it comes to checking the advance mechanism - lubricate and make sure the springs are attached is about the limit before you have to use a testing machine.
With the contact breaker plate in place, you can't even see the advance mechanism; but, by twisting the breaker cam on its shaft you might be able to get a subjective feel as to whether it twists too easily which might be an indication of a broken spring. The reality is that to check the mechanism you pretty much have to remove the distributor from the engine and disassemble. If a spring is broken or the advance mechanism otherwise mucked up I don't know what you will do (other than 123 distributors) since I don't know whether replacement parts are available for the advance mechanism.
Before removing the distributor, it should be possible to do a running test on the car. With the engine idling at 800 RPM and the vacuum servos blocked off, increase the engine speed up to about 2500 RPM. At 2500 RPM the centrifugal advance should be providing about 20 degrees of crankshaft advance so you should see the timing marks move about 20 deg. The specs for the centrifugal advance are exceedingly loose. The manual says that 20 deg occurs somewhere between 2300 and 3300 RPM so you may have to go slightly higher than 2500 RPM if your advance mechanism is arthritic. If you get no significant increase in advance as you increase the engine speed from 800 to 2500 RPM then I expect that your advance is coming in way too early indicating a problem with the advance mechanism. If your advance increases from your current 20 - 25 BTDC at 800 RPM to 40 - 45 BTDC at 2500 RPM, then your centrifugal advance mechanism appears to be working and I really don't have a clue as to what is going on.
Assuming I am correct, lets address why the engine operation deteriorates when you try to correct the running advance to where 'it should be'. At idle, the effect of increasing ignition advance (within limits) is to increase engine speed. Anybody who has a B20E with the vacuum retard function will observe that when you clamp the vacuum servo line the engine speed will increase by about 200 - 300 RPM. This is because the idle speed advance is changing from about 3-5 deg BTDC to something over 10 BTDC (depending on how much the RPM goes up). If, after you rebuilt your engine and set you static ignition timing to 10 deg BTDC, you set up your idle speed using a distributor which was actually providing 20 - 25 deg of advance, as you tried to correct the advance back to 10 deg BTDC you were effectively causing the idle speed to drop, likely to the point where the engine cannot operate. The set static advance, start engine and set idle speed then check actual advance and do fine adjustment on advance and idle is the correct procedure when everything is working.
So, you need to check the distributor and confirm that the advance mechanisms are functioning correctly. Assuming I am correct, when you reinstall the corrected distributor and set static advance, you will have to reset the idle speed. At that point you can do the check of timing which should be around 10 deg at 800 RPM.
If you don't have it, I have attached a screen grab of the ignition setting spec for the B30A