I agree with most of your post, but the above portion is inaccurate. Air density decreases with increasing altitude. At sea level it is greater than at elevation.
Apparently a grammar fail ("Running at sea level.... ") as I ran that together, but the intent was correct. More air = LEAN = increased tendency towards detonation. Double whammy if the air is dry and hot.
What it comes down to is this; its not the most sophisticated ECU for engine management. It does OK, but it could do more. The addition of a knock sensor and it could advance the timing MORE when better fuel is used (increase MPG and performance) and retard it when poor fuel is encountered. From a performance aspect its lacking as it strives to maintain stoichiometric ratio with its narrow band O2 sensor (its not a race bike). Its great for fuel economy and the environment, but keeps the performance below its potential.
Sorry about the confusion.