Hello

I am trying to get my BMW running. When the engine is cold, it has a lot of knocking. Once the engine is warmed up, there is no knocking.

I know for a fact that there is a long way to go with mapping this engine, but I need to know more about how the ignition is controlled by the water temp when the engine is cold.

Does is retard or advance the engine? and will a way too high idle fuel have much to say in this area?

This is the engine running at optimal temps http://www.youtube.com/watch?v=d726Rq9EAGc

To put it simple, when diesel engine cold you get more heat loss - that means you need to compress fuel longer and add heat from heat plugs before you get some work form successful combustion explosion. Useful work is produced after top dead center (ATDC).

So

engine cold = advanced injection begin (before TDC)
engine hot = retarded injection begin (closer to TDC, even A(fter)TDC in some cases).

ECUs will have at least two SOI maps and several correction maps (for coolant and air temperatures and atmospheric pressure) to keep end of injection at efficient point in all conditions.

In general don't touch SOI maps if you don't need to.