2.5mm111 Thats a **** ton. You mean 1.5mm/60thou maybe??? that is about teh max I could get on the stock t-belt tensioner and need to advance a whole tooth basically at that point. I'm shocked that the t-belt tensioner even holds the belt at that point. My H-cam ~12:1 compression B23 with a cometic leaves a bit left on the t-belt tensioner, but not a ton...just barely enough for normal service life of a belt.
It is about 1 cam degree of retard for every 10 thou, but you should do the calculations for your own self. The good news is that on a sohc volvo the t-belt is basically perpendicular to the block/head deck surfaces, so if you know the approximate diameter of the cam pulley/sprocket (do we have consensus as to what to call the thing lol for all your "gear" or "pulley" or "sprocket" nazis) and measure the head on the corner and look in the book for a new uncut head, you then know how much your timing is changing in relation to shaving the head and how much your head is shaved from a perfect new one...don't assume here.
I have to advance my camshaft just a hair less than one belt tooth (9 camshaft degrees), though I gained a fair bit of SCR so I'm running my camshaft near steaight up or a hair retarded theoretically and the powerband winds up in more or less the same place.
That cam should drive/make power about the same as an H. I'm using a slightly recurved volvo H/K cam ignition distributor. It starts out at 4 degrees at idle an climbs pretty sharply. Can't run much timing at idle without a spark miss and really most OEMs just want to get the thing TO idle at all. That means not richening it so it wants to foul/flood out and not running too much timing to wind up with a spark miss, but enough to keep the plugs warm and get the thing to run.
A spark miss reads as lean on a wideband 02 sensor. You need to make this easier on yourself and eliminate variables.
1: Establish where the camshaft timing should be to at least restore it close to stock (which could be complicated if the shapes of your lobes are way off "normal" offset from the pin in addition to the shaved head...the cam grinder will have to answer for some of that and check it with a degree wheel (or you will)....see "mushroom effect" and other issues...cams are complicated beasts to design to even work with the valvetrain, let alone produce the kind of power you want where you want it)
2: Run nice conservative ignition timing to start and conservative warmish plugs...make this easier on yourself starting out. We don't want a nasty spark miss if you are tuning off the wideband 02, and we want it to be harder to foul out if you are trying to smooth it out and things are less than ideal. Start with something like volvo did at idle...5 degrees BTDC or so. I start with like plugs 1 or 2 steps warmer sometimes (when I have no idea what to expect), conservative timing, conservative spark gap etc. Then, when it comes time to really dial more out of it, start dialing that stuff in in systematic steps. Most t-brickers use a shotgun approach for anything...change tons (shoot tons up on the board) and see what sticks lol.
3: Start to stabilize the AFRs and really get things smooth from idle-redline.
4: Last but certainly not least, dyno tune it and triple check any maintenance or other dumb stuff...heck you should test all that stuff all along...plug readings, possible soot reversion into the intake, anything and everything you can log should be logged and dead reliable (if not slow) before it gets strapped on the dyno to actually make power.
Anyway, you have a lot of unknowns and variables here. I suspect between potential spark miss, cam lobe shape offset and god only knows what else you have no chance of making it run right without checking/correcting all of that. I've run cams wilder than that in a volvo redblock sohc with no problems.
I should also mention, many people tune their megasquirt volvos very strangely. They put all their bins evenly for RPM and load like every 500rpm from idle to redline and from idle to WOT. This is contrary to just about all sane tuning philosophy. Think back to your lawnmower...it has maybe a small finer tuned adjustment for "turtle" on the carb/magneto and a radically different set for "rabbit." Well, graduate up to your k-jet B23E...same thing is happening...there is a spring in the dist for "turtle" (lower RPMS and load) and "rabbit." I guess what I'm saying is that you guys should have a lot of bins in places where the behavior of the engine transitions more rapidly/on the bottom and just try to keep things holding steady as you scream through "rabbit" to redline. I know that doesn't make a lot of sense how I have it typed, but as an overall theme, that is how most people approach this, from lawnmower, to OEM automotive, to racing (though in racing we mostly want to just make the thing idle and don't much care if it isn't that smooth under 3000 or whatever). It has worked well for me in practice.