The AMC242 engine has fairly low compression and does fairly well from a 'quench' point of view, so 87 octane should be no trouble (I've run worse...)
Sounds like you might have a good deal of carbon buildup in your cylinders. Here's how to handle that little nuisance...
1) Disconnect the catalytic converter at the flange. You'll need a new gasket for this, but they're fairly cheap (in a pinch, use some high-temperature gasket material and coat with a thin layer of RTV copper.) Tie the converter inlet out of the way (you won't be driving for this.)
2) Get a trigger spray bottle full of clean water - preferably distilled or reverse-osmosis (RO) filtered. No need to add anything.
3) Remove the snorkel tube from the airbox (make sure you're not anywhere dusty!)
4) Start the engine, and have a helper hold the engine speed up around 900-1000rpm.
5) Using the finest spray possible, shoot about one full spray of water into the open snorkel tube about every 20-30 seconds. Watch for black clouds coming from the exhaust (this is why you disconnected the cat and tied it out of the way. This is the carbon that is in your cylinders...) Repeat as necessary until you don't get any clouds anymore, then about three or four times after that (just to make sure.)
6) Shut the engine off and put it all back together.
WHY THIS WORKS
What is happening is that the liquid water you're spraying into the intake gets sucked into the cylinders, where it tends to be absorbed by any deposits in them (on the pistons, on the head, on the valves, ...) Combustion temperature 'flashes' up around 1800*F - this is enough to "flash boil" the water in the deposits. The sudden expansion of the water into steam literally blasts the deposits loose from whatever surface they're on - you're actually "steam cleaning" the inside of your engine. This is a harmless process.
The reason you disconnect the air filter is so that it won't stop the water from going in and doing its work.
The reason you disconnect the cat is so you don't coat the matrix with carbon and wreck it.
This problem is slightly worse on RENIX XJ's, due to the EGR valve. Since it cycles exhaust gasses back into the chamber, it also serves to recirculate carbon into the intake stream, which gets deposited on damn near everything (I know, stupid idea.)
It should take you about a half-hour, tops. Cheap, easy, and fairly quick -and it works better than all the expensive chemical cleaners out there (my criterion for "environmentally friendly" is this - if I can use the same amount or less of a "friendly" solvent, it's friendly. If I have to use significantly more, it's not. This is why I don't like non-chlorinated brake cleaner - for the job, trichloroethane is almost an order of magnitude better than acetone/MEK/toluene in the non-chlorinated stuff. Carburettor cleaner doesn't work worth a damn on brake dust...)