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well those marks dont look to bad but the rust concerns me. if moisture is getting in there it maybe causing some issues. you may need to pull the dizzy and restab it to get it a bit closer. the mileage on your motor isnt that high to make me think a bad chain. you might also try running motorcraft cap/rotor as well. and reset your timing one more time before removing the dizzy just incase things have backed off a little. its possible to that the dizzy itself is bad and might need replacing
Now I did not think that it was rust. It looks as though the arc is either too weak or too strong. When I reset the dist. should I move the oil pump shaft too? If I move the distributor on tooth then the shaft will not line up at all. What do you think on that?
You can move the shaft a bit help line it up, but what I generally do is to pull the distributor up just a bit, while applying a light amount of torque by hand to the rotor in the direction I want to turn it, just enough for the teeth to disengage but so that I can feel it turn to the next tooth and then drop it back in. This will be enough to pull the pump shaft out of its socket and it won't let the distributor drop back in all the way, but a quick bump of the starter turns things enough to get it back into alignment and the dist. should drop back the rest of the way on its own. If you pull the dist. all the way out, it's harder to know when you've moved it just one tooth and you risk pulling the pump shaft out with the dist. enough to let it fall back into the pan. Then you've got new problems!
If you decide to pull the dist. all the way out, you can pull it up gently as you tap with a small hammer on the base of the housing. This should knock the pump shaft loose from the dist. if it is sticking (and they often seem to) and let it drop back into the pump (hopefully) where it belongs, if the retainer clip is no longer in place doing its job. (And it usually isn't!)
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