IAM went down because the ECU saw enough knock in enough areas that it decided to decrease timing across the board (that's what IAM does). Basically, it thinks you've accidentally filled it up with 87 octane.
When IAM is less than 1, FLKC can add timing. Think of it as the ECU "testing the waters" to see if it's safe to raise IAM a notch.
Timing is being pulled. With IAM less than 1, you may be running less than full advance even when FLKC is positive. FLKC just isn't positive enough to make up for the drop in IAM.
Total timing = base_timing + (IAM * timing_advance) + FLKC + FBKC
You should decrease timing in the regions where the log showed knock. Look for random peaks in the timing tables in those areas and cut them down if you see them.
Here's a utility that you can use with RomRaider to visualize and tweak the total timing: