How to set ignition timing?

I just adjusted the timing on my truck listed above it is a 5.7 liter. My truck was getting horrible gas mileage and I had already done everything else (i.E. Replaced every sensor). The timing was set at around ten degrees so I set it at zero (or about as close as I could get it to zero.) This was a pain as every time I tried to tighten that distributor bolt it adjusted the timing slightly. Anyways. When I got the bolt sufficiently tight I checked the timing one last time and then turned the truck off and reconnected the black-tan wire under the firewall (ECT or something?) I drove it around for a bit and rechecked the timing when I got back. I left the black-tan wire plugged in and noticed that my timing was way advanced (probably around sixteen degrees) and fluctuating slightly as the rpm's went up and down while idling (this is one of the annoying things I have been trying to fix). So I unplugged the wire and started to re-do the timing adjustment. Well after I unplugged that wire the timing was back to zero degrees.

So what the heck? When the wire is not plugged in the timing is at zero. When the wire is plugged in the timing reads around sixteen. Should I leave the wire unplugged? Or is it normal for the timing to jump back up when you plug the wire back in?

So this is normal then? Or is something up with my PCM? Thanks for the reply!

Thank you worked perfect!

1994 Chevrolet Silverado K1500, 350 v-8, automatic transmission. With timing light attached, ignition timing retards towards TDC when throttle is pressed causing engine to stumble and stall. Distributor as to be advanced so that the timing mark, at idle, is almost at the 12 o'clock position to compensate for the timing retarding when accelerating.

This results in very poor performance, fuel economy and detonation above 45 mph. I disconnected the Electronic Spark Timing wire from the distributor just to see if condition improves. Timing set around 4-6 degrees at idle with some advancing occurring when accelerator is depressed. No engine stumbling or stalling, drive performance is tolerable. However, service engine soon light remains lit, of course.

Confirmed that number 1 cylinder location on distributor is correct at TDC. Also replaced IAC and Throttle position sensors. No SES light prior to disconnecting EST wire from distributor.

I can get engine to run better with it disconnected, setting timing at 4 to 6 degrees advance at idle and it jumps to 8 to 10 degrees advanced under throttle. Once I reconnect the EST engine runs poorly as timing is retarded. That's why I had to run the distributor so far advanced with EST connected as it will retard the timing by as much as 10 degrees upon throttle.