That is correct you would need 8 channels to do direct fire. You can also get away with a DIS4 to run waste spark(fire paired cylinders together) The MSD does RPM based retard only.
You can also use a AEM C2DI however it does not have the ability to reduce timing. You can use a motec cdi it will do boost based timing retard. There may be other systems out there that use a map sensor for timing retard, which is ideal anyway since with boosted applications you are supposed to add a bit of timing back in after peak torque(peak cylinder pressure).
I've used a Jacobs Notrous Mastermind on my SBC motor that safely runs 175bhp of Nitrous.
I know the old chevy isn't the same as the 1UZ, however the fitting instructions included full details of how to fit to a modern ECU'd injected engine.
Please look into this unit as it is great. As well being able to run normal timing and then retard when the Nitrous flows, it has many fail safes such as low fuel pressure cut offs, Nitous pressure cut offs, rev limiter for the gas, then another engine revlimiter 50 revs after (prevents engine blow ups). The engine rev liiter also contimues to work when the Nitrous is off.
In addition you can set what revs you want the gas to flow, what %age of total flow you want at that point, max flow revs, and it will increase the flow in proportion between these 2 points.
If you are playing with Nitrous then a unit like this is a must.
Just an update: Speed shop said my 125 hp shot should be ok with the stock ECU. I went two steps colder on the plugs and went 50/50 with racing gas. What a difference! Engine sounds beautiful on the N20 and I havent had a trouble code show up.
I don't think the DIS ignitions will work on the newer 8-coil systems. The ignitors are integrated into the coil packs and would burn up...this was their answer when I inquired about using their Stacker 8-channel distributorless ignition box.