Nailing down the timing is probably the hardest aspect of tuning these trucks. With stock nozzles, can just stick to the factory timing tables with good results, but once you start running larger nozzles and higher oil pressures, it can become a bit of a crapshoot and your results will be highly dependent on the experience of the tuner. Matt at Gearhead performance and Bill at Power Hungry Performance have contributed excellent tech to quite a few threads on some of the 7.3L diesel forums discussing the finer details of tuning 7.3Ls. I highly suggest doing some reading if you want to get a better understanding of how these engines work and how they should properly be tuned. Bill was one of the pioneers of 7.3L tuning and created the tuning software that pretty much all the 7.3L tuners use today.
Here are my cliff notes on timing:
Start of injection (SOI) which you specify in your tuning parameters does not have a constant correlation to start of combustion (SOC) which is what you are really trying to control. SOC is greatly affected by things such as engine operating temperature, ambient air temperature, intake air temperature (post intercooler), and boost levels (really the pressure in the cylinder prior to the compression stroke). Compression ratio and cam timing will also affect things, but most people don't change these parameters. Hotter temperatures and higher boost levels advance SOC, while colder temperatures and lower boost retard SOC. That is why the 7.3L has a cold advance map that will drastically advance SOI at low oil temperatures since the fuel burns much slower at low temperatures. Also, injection pulse width will play a huge role in timing at higher RPMs where the available injection window becomes shorter. High RPM is where larger nozzles really shine since they can deliver the same amount of fuel with a much shorter pulse width which allows more of the fuel to be injected at optimal timing. Optimal timing will produce the highest torque/power and the best fuel efficiency. Many people erroneously believe that the more you advance your timing the more torque you will make since cylinder pressures go up. The problem is that cylinder pressure does not necessarily correlate to torque, and the further you advance the timing beyond what is "optimal", the more "negative" work is being done. Any combustion pressure developed before TDC is doing negative work, and combustion pressures generated after TDC are doing positive work. You want your peak combustion pressure to occur after TDC in order for the engine to be able do any work. Due to crankshaft geometry, you want your peak combustion pressure to occur around 12-14º ATDC. The peak cylinder pressure increases exponentially as you advance past the optimum 12-14º ATDC point and that is what lifts heads and blows apart bottom ends. The problem is that unlike spark ignition engines, you cant precisely control when combustion starts.
Here is an excellent read on diesel timing:
Diesel Timing
As alluded to earlier, the only way to really get your timing maps nailed down is to do some live tuning with a shop that is equipped to monitor cylinder pressures. I know Swamps offered this service in the past, but it is above and beyond what 99.99% of people are willing or able to do. A competent tuner and standard live tuning should be sufficient, and a very experienced tuner should be able to get you 90%+ there iterating over email.
As far as your question about what to monitor or data log, there isn't really really anything you can do to monitor timing. If your timing is too retarded, you'll see higher EGTs, the diesel "clatter" will become much more subdued/reduced, you will be down on power and get bad fuel economy. If your timing is too advanced, your engine will be very loud (very pronounced diesel clatter), and you will be down on power. Obviously being too advanced is the worse of the two scenarios. The only way to optimize timing without pressure transducers in the glow plug holes is to perform timing sweeps in your tune and iteratively test in a repeatable environment (dynamometer). The timing that makes the most power for a given amount of fuel injected will also be the most efficient.