If the motor is using “room” air, which I would not suggest…. You would be surprised how quickly the room air will get contaminated with CO, and alter your results… You really need fresh outside air for the motor to breath….
So in that scenario, it would be outside air temp….
On my Dyno ( Dyno-Jet) I have a weather station in the stack. It checks the dyno room air. We have a very good exhaust system and a fresh air inlet to the room. The weather is always checking the air and correcting . On the screen there is a selection for DIN SAE STD and Uncorrected. I always use SAE. This corrects for sea level. Note. There are a few things that can effect the test. Bad axle or drive gears, roller chain, draging brake, axle bearings, ect…
To see if the change you made was good. See if it is “repeteable” To the baseline test. Make a change- retest. Good or bad the results. Go back to baseline setting, retest again. It should be the same as the 1st baseline At the very least VERY CLOSE to it. Hope this helps.