You have the advance hooked to ported vacuum instead of manifold vacuum. I have an 84 500SEL and find that the engine doesn't care which way it is hooked up. If it runs good, idles good, and starts good then leave it alone. Something I learned just a year ago or so, these engines are designed for Regular gas and mine actually gets better MPG and seems to run better with it. TDC is the correct setting.
By the way, the 85 is a generation I, 86 and later are generation II.

Paul

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84 500 SEL (307,xxx miles)