Knocking is very, very, bad and you need to fix this. Presuming that the engine is not overheating, it is either not enough fuel or crappy fuel. BTW you need to fit an oil cooler and run fully synthetic oil to deal with the heat issue but that is another subject.
The compression ratio numbers being kicked around are static and it is the dynamic ratios (DCR) that determines the fuel octane requirement. To calculate this you will need to know valve timing. Here is a simple way:
Wallace Racing: Dynamic Compression Ratio Calculator
Once you know your DCR, then calculate the octane requirement by:
10 (multiplier) - DCR = X
X + 10 = Y
Y x DCR = Octane requirement in RON
Seemingly yours is a too low octane problem, however the other possibility is that the engine is not getting sufficient fuel. This could be a result of running too lean in order to pass emission requirements, or you have changed the aircleaner or exhaust resulting in a lean mixture. Contrary to what you are told, the factory ECU is calibrated to meet strict emission requirements with the stock filter and exhaust. Changing one/both of these items results in a lean condition for which the factory ECU cannot compensate, while delivering any measure of performance. There is no way around this problem and once you start on the road to a better intake and exhaust you must buy the ECU a the same time.
Do not waste your money on the factory ECU solutions and go straight to the aftermarket. While a PC is a popular choice is is not necessarily the only choice, and you may want to look at something like Zippers Thundermax with Autotune. Whatever ECU you choose, be sure that it has an autotune function and knock sensor, that can dynamically remap the ignition curve in relation to load, fuel quality, state of tune, and rider input.
This autotune function will get you around the need to dyno tune the engine as it will dynamically alter the fuel and ignition curves to optimize performance. Sure a dyno is nice but you (and I) do not have that luxury so this is the best way around the problem.
Needless to say, fuel consumption comes secondary to peformance and you cannot have both.
There are similar ignition only, boxes with auto tune and a knowck sensor for carbed bikes and I have been using the S&S "Intelligent Ingition" box for several years.
One additional advantage of the autotune type, non-HD ECU is that it can adjust as you change intake, exhaust, cams, compression, fuel, altitude etc. No more dyno runs every time you change something.
The plug suggestions to cure the knocking are uninformed, however you should see a 1 Hp increase using an Iridium plug - I like the NGK's
Index the gap facing the intake valve.
There are larger Sportster tanks from either HD or the aftermarket, and most riders end up buying one as the small tank is far too small and leaves a lot to be desired.
Remember that the expensive bike you just bought is only a starter kit and now you have the opportunity to spend even more money to make it perform like the factory could not.
I am also a Bullet owner, and have owned, ridden, raced, and wrenched HD's for 40 years. Please PM me if you have any other questions as I am happy to help in any way that I can.