I don't think the high NOx is due to a lean condition. Running a little richer might help, because you have a some HC and CO margin, but you have no control over the mixture. It's never a bad idea to check O2 sensor output. On my 2.6 I can pull out the O2 sensor signal lead connector (under the passenger footwell carpet) enough to get a scope test lead on it and eavesdrop on its output. This way the O2 sensor is still connected, so the test setup does not disrupt the operating circuit. I look for the signal to jump back and forth between about 0.2 and 0.8V at a frequency of about 0.5 to 2.0 Hz.

Wish the IM 240 test results included O2. The O2 content is a good diagnostic tool on the CA ASM test.

BTW, what are the most recent emission test results for your '87 300E.

Duke