I'd just put the "smog" stuff back on, you aren't going to get it to run properly without it. Your problem is that the timing is mechanical with extra control provided by the vacuum switchover and diaphram that you have disconnected (I think -- certainly true of the 73). With this off, you aren't getting the advance you are supposed to, and have it set far too high at speed.
What rpm are you setting the timing? If you have limited mechanical advance inside the distributor, you are going to have to choose between high rpm or low rpm operation -- 26 degrees is about right for 2500 rpm up, but it won't run properly at low rpm, and if you have 26 degrees at low rpm, you are surely much too fast at high rpm.
I don't know when spark knock starts, but for sure you WILL NOT hear detonation at high speed. At least you won't immediately burn holes in the pistons, but running hot is an indication that you have overadvanced timing.
As far as I know, you have, for "smog" equipment on this car, some timing control via a swithover valve and maybe air injection and a catalytic converter. Only the 1980 models had electronic mixture control. I don't know if you have EGR or not, but if you do, I'd leave it on, too, to prevent too hot a combustion temp -- after all, it was designed to have the EGR, it wasn't just stuck on willy-nilly.
Why did you remove the emissions control stuff? If you want more horsepower or better milage, you won't get it -- the "problem" is in the cam, not the emissions control equipment, which in any case is very minimal. The 116/107 chassis is a gas hog, and suffers from low performance compared to the 280 SE/L 4.5, and the only difference is the head and cam -- the K-Jetronic fuel injection gives more hp and less fuel consumption.
1972 220D ?? miles
1988 300E 200,012
1987 300D Turbo killed 9/25/07, 275,000 miles
1985 Volvo 740 GLE Turobodiesel 218,000
1972 280 SE 4.5 165, 000 - It runs!