I have been chasing a similar problem with my '87 760 Turbo and found 2 items that really did the trick...first check that knock sensor is in place (mine was physically damaged) and the connection... if bad it will retard timing all the way when driving.

According to what I read there is no real effective way to check it electrically.

They do tend to crack with age. When replacing make sure that the landing area is very clean...DO NOT tighten more than 8lbs or it will not read correctly and you could crack it.

Also make sure that the "pigtail" it connects to is not right up against the alternator..could cause interference...use zip tie to fasten it to harness away.
I was told that these often get broken off when someone lifts the eengine to do the mounts.
When you buy (if used) make sure that you get the same "style"--one with flat top and one with dome top.

Second, check the temp sensor going into the top of you radiator...if this (or the other sensors in the head) is/are bad the computer will be confused and your electric fan will not run.

I changed out these 2 items and saw a Tremendous improvement (like +20%) and smoother acceleration. Really made a big difference.

By the way, I ended up with a "spare" knock sensor when I bought 2 off eBay let me know what stlye you need...I will sell it for $15 plus whatever freight you prefer...a lot cheaper than new but it is of course "as is"

You do have a car with the "biodegradable" wiring harness (as mine)...there is a guy on eBay motors who pratically specializes in replacements. It is supposed to take 5-8 hrs and is easier with the intake manifold off...check FAQ.

I have not done mine yet, but I have carefully looked for the telltale crumbing insulation.

Temporary repairs have worked so far-- liquid tape then re-wrao with top grade 3m tape... in some cases like the brown ground wire running from the top of the intake down into the bundle under the intake.

I had to take the bundle wrap apart and repair 3-4 wires with insulation cracks 1" long hidden inside and then splice in a new wire to repalace the completely shot brown ground wire, again good connections- sealed with liqiud tape- then re warp individually and re-bundle and wrap the entire group also used several zip ties to keep it tight.

I see this as temporary, but after I was done I degreased the engine at a car was and had no shorts or problems--perhaps a little foolhardy but wanted the grime off.

Good luck and let me know if you need the used knock sensor.

David Lamb
dgltrader@comcast.net