I think your timing is way too advanced. Are you getting any knocking when you accelerate from a stop? I'd be surprised if you aren't.
If your centrifugal advance isn't doing the job, that's something to deal with. The problem in timing at ~3500 RPM is that if you're not getting enough advance, you end up with way too much initial advance. The factory spec is for the initial advance, so I'd time it for that.
That said, I time my Porsche 912 for advance at 3000 RPM, but I have a modern, electronic distributor that has the precise, factory advance spec programmed into it. I can't do it at idle, because it adaptively changes the timing to smooth the idle, so it bounces around a lot.
Remember, these cars do indeed run well when the parts work right and are adjusted right. You don't have to do anything special to make them work properly. Tweaking the carbs and such to prevent overheating is not addressing the fundamental problem, and really shouldn't be necessary.
I'd suggest bringing the timing back to 5 degrees (or whatever the factory spec is) and I'll bet it runs cooler. From there, you can tweak it a little to compensate for the differences in today's fuel and such, but you shouldn't have to make big changes.