As far as timing is concerned 45 degrees on alcohol is not unheard of but its rare. I would tend to think that there is somthing wrong, maybe pointer, maybe cam timing, wrong converter. What is your convertor rated for.
The guys were right about the timing lights too. There has been may problems linked back to timing lights. I had a problem with one just recently. Drove me nuts.
I have 4.88's in my car as well with 44's on the rear and its 1-1 thru a chaindrive to the front. I have a 5600 stall converter and I turn my 632 to 8000 using only first and second gear. I don't think that the gears are your problem.