Ignition Timing

I went to get a CA smog, and failed. Among other things, they said timing was 7BTDC whereas it should have been 15BDTC. I came home to check it out. Before I knew I was supposes to jump two wires in a connector as per the shop manual, I hooked up my timing light and checked the timing. It looked like my timing was 15ATDC, not 7BTDC like the shop said. Obviously something was wrong with the way I was reading the timing, but regardless, I figured I'd better advance the timing. Turns out I can only turn the distributor as much as the slots in the mounts allow, which barely got me to TDC (the way I was reading it).

After checking the shop manual, I discovered I needed to jump two wires in the connector in the fuse block under the hood. I did, and nothing changed. Because the distributor limits adjustment, I can't even set it by ear. What I ended up doing was advancing it as far as it would go. I can tell by ear it has indeed advanced, but because it looks so off when I shoot he marks with my timing light I can only adjust it by guessing a change in position based on from where it was when they said it was 7BTDC and it looked like 15ADTC,

Anyone have any suggestions?

FWIW, they also said I needed a cat and an O2 sensor, and that I have an exhaust leak. Now, I know that the computer might try to compensate for the leak and O2 sensor, but I doubt it would compensate 25 degrees. Not only would the car not run, how could the shop see 7BTDC when what I see looks like 15ATDC.

Please healp.

To pass emissions try a higher octane fuel, first Gen integras are designed for 91 octane or higher. Throw in a tank if premium and a bottle of octane booster and see if you don't pass then.