If you have an 88 740 adjust the timing by simply rotating the distributor after loosening the screws (2 if I remember correctly). Whoever thinks or says that you cannot do it is wrong. The 89 has a crank position and timing cannot be shifted, your 88 has a hall sensor in the dizzy, rotating dizzy changes timing.

Forgot O2 sensor, knock sensor etc, they will not cause your problem. The knock sensor is simply a microphone that detects knocking and retards if and only if knock it is detected, of course this will not happen when it is faulty.

Have you tried adjusting your timing? You do not mention if timing shifts when rpms are increased off idle.
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David Hunter