The scenario is this: I am saying this at my home to my friend but when I thought about that, I was at a bar.
Example 1
That was the time I knew I should go back home.
Example 2
That was the time I knew I should come back home.
The scenario is this: I am saying this at my home to my friend but when I thought about that, I was at a bar.
Example 1
That was the time I knew I should go back home.
Example 2
That was the time I knew I should come back home.
I would use 'go', since the speaker is talking about what he knew then, when he wasn't at home.
It's basically the same principle as the "backshifting" in He told me what his name was, which we do because the containing utterance establishes the temporal "frame of reference" as being in the past.
By the same token, in OP's example, the locative frame of reference (at the time) was the bar, not "home". Standard use of come / go home is governed by the current frame of reference, which in this context comes from the utterance itself, not the speaker1.
Here's a relevant usage example from Google Books...
...I remembered that the voices said I should go home. So here I am.
Here are several more examples (interleaved with some irrelevant text matches).
1 Note that a homesick person says I want to go home when talking to someone else - unless the person he's talking to is at the speaker's home (on the telephone, for example), in which case the homesick person says I want to come home. I point this out to show that it's not necessarily the speaker's location that counts.