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Knock sensors only retard the timing 8 or 12 degrees max, if I recall correctly. Plus retarding timing moves the engine AWAY from detonation, not towards. A slight, almost imperceptible loss of power results, most would notice a loss of fuel mileage before power loss as a result.
Have you tried disconnecting the coolant sensor (for the computer) and seeing what happens? Erratic behavior from the sensor could send the fuel management into a tailspin. The symptoms you describe sound more like that or the MAF is going wiggy. Does the oil smell like gas? Is the oil level mysteriously getting higher, as if oil has been added?
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