Initial timing is too far advanced. Loosen the distributor cam set screw and turn the cam a little clockwise to retard the timing. Not much, just a tweak at a time. Check after each adjustment. When the timing is too far advanced, the engine runs better as the spark lever is moved upwards to the retard position. As it is advanced by pulling the lever down, the engine will knock. Just retard the timing in small increments until you find the sweet spot for both the retarded and advanced spark lever positions. That should do it.
Marshall