Matt, vacuum advance is only active during high manifold vacuum conditions. This means light throttle cruising, and idle depending on what vacuum port you are using (manifold or ported). The vacuum advance should advance your timing at 4K rpms at a cruise, but not WOT. So, when you checked the timing with the vac advance hooked up, 46 degrees was probably only 20-25 peak at WOT. That will definitly make the engine run like crap, but won't harm anything.
Is the HEI in the car stock? Stock HEI's have stiff advance springs & a very slow advance curve. If it has not been re-curved then the peak timing isn't reached until at least 5000 rpm, so be careful. 36 degrees at 3000 rpms could be 45 or more at high rpm. It you install light advance springs, then the total should be in by 3000 rpm.
-Andy