"Notch" was a figurative term. You'll need to work through a chip or QH to reduce timing. Although if you don't have any tuning then you are probably running lean too which will make the motor more likely to detonate even if timing is not too high. Black smoke can be generated from detonation so don't just assume that since you see smoke it must be rich. You need a WB02.
Stock timing is 26 deg which is way too much for 18psi. However, stock timing minus full knock retard (assuming you have a functional knock sensor) would put you at 18 deg which is actually not too bad for 18psi. But if the motor has leaned out (extremely likely unless you have 60lb injectors) then even 18 deg would be too much. Well, 18 deg might be what the motor wants but it will never run detonation free if it is lean at 18psi.
Engine damage may well not have occurred yet, but it will if you keep it up. The reason that the oil comes out the top of the dipstick is two fold. First, pressure is building up in the crank case. If you have not plugged the valve covers (you should have a working PCV connected to the inlet plenum and a vent on the driver's side either free to atmosphere or connected to the inlet tube), then if pressure is still building in the crank case then this means that the rings are not sealing. If the rings are sealing under normal conditions but not under boost, that means detonation. Detonation "rattles" the rings and causes them to unseat off the cylinder walls and allow combustion gases to pass by. During this process the ring lands take a severe beating and eventually they will either crack or become worn down to where they don't properly support the rings. In either case you will experience irreparable damage to the pistons (eventually). Then when the gases escape and the whole detonation dynamic occurs, that process introduces even more oil into the air circulating in the crank case than normal which when combined with the pressure, makes an even bigger mess than normal. If you don't have a PCV system catch can, then this oil is also getting recirculated via the PCV through your blower and IC system back into the engine to get burned. It won't make the motor smoke blue, but it will very significantly lower the octane rating of your fuel and you know what that means - even more detonation.
If the rings lands have been damaged, it is possible to have the motor pass a compression test yet still fail to seal the rings under boost. This is another reason why it is important to take this problem seriously in the beginning. Unfortunately often times by the time people notice the problem, it's too late. Hopefully that is not the case with you.
