its not very common for compression to just jump up like that.

anyway. try fiddling with your timing a bit more. try it at like 10deg btdc and then at 15 and see if that helps.

dropping the compression is most easily done by using a thicker head gasket (as you suggested).
anywhere above 1mm thicker than the 1 you have now should drop it down a factor of 1, from 10:1 to 9:1 say (9:1 is standard).
but id recommend advancing the timing more first.

also try it without the vacuum advace disconnected. it may be faulty and causing your timing to retard or something...