[chopper]

FWIW, I had the timing set on my engine (Southern Automotive 427 SO/484 stroker, aluminum heads and dual Holleys) set to 10 deg at idle (900 rpm), increasing to 38 deg at 3200 rpm, and it returned to idle without any problem. I might suggest that you check the carb float settings again. My personal experience with Holley floats was that the most reliable setting for the float level was made with the float bowls off and inverted. I adjusted the needle valve so that the floats were horizontal with the bowl inverted, and then made only minor adjustments once the engine was running. I found that if I had to make a significant adjustment (more than one full turn of the float adjuster nut), there was something else wrong. Keep in mind that the final float level should be adjusted with the engine running at a sufficient speed to allow the fuel level in the bowl to begin to drop, which will cause the needle valve to unseat and allow fuel into the bowl. The fuel flow at idle may not be high enough to allow an accurate adjustment. Every time I've tried to adjust the floats on a Holley at idle, I ended up with the floats being adjusted too high, which in turn may directly cause the problem you describe.

I assume you've already checked this, but you should also make sure that the needle valve is clean and not sticking, nor leaking at the seat. In my experience, the needle valve design of the Holley is one of the weak points of the carb, and I used to carry spare needle valves in my tool kit to change if they stuck or got dirt in them. Any minute piece of trash on the face of the valve will prevent the valve from seating and will cause the carb to flood.

One other item to check is the power valve. I exchanged the power valves on my carbs from the stock 6.5's for 8.5's like you did, and when I went to the speed shop to get the valves, I took a power valve checker and a hand vacuum pump with me. The speed shop manager and I went through eight power valves before we found two that actually opened at 8.5 inches. The low from this sample was 4.0 and the high was 12.5. It may be that what you (understandably) assume to be an 8.5 valve, isn't. If the actual valve opening value is very close to the engine idle manifold vacuum, it may cause the valve to open momentarily during pressure fluctuations following throttle closure. Holley says that opening the power valve is equivalent to increasing main jets by 8 to 10 sizes. This may cause the carb to run temporarily rich upon throttle closure. Just a thought.