Timing is .090 B.T.C.
Air gap is .012
Point gap is .020
You need a tecumseh dial indicator and a 1/64 scale steel ruler
Pencil and paper...
Tecumseh doesn't mention this because they want their shop to do it....
Set points first at .020 with a slight drag and clean the points with a dollar bill to get rid of any oil or crud.
Set timing next using large treaded screw on dial indicator offset lever for this engine if you don't have dial indicator take off the head and measure very slightly less than 3/32nds (which is .094) before top dead center. I go a little further than .090 to like maybe .100 and move crank clockwise to .090 to take slack out of engine parts.
Disconnect all wires from points and connect a lead from the ohm meter to the threaded point's post and the other lead to ground. When you rotate the crank clockwise to .090 the points should begin to open and the ohm meter should read infinite. If not lossen the stator bolts and rotate the stator to get the points to open at the right B.T.C. settings Then tighten down both stator bolts - Get this as accurate as you can.
This old of a motor like yours requires a tecumseh cut away flywheel to adjust air gap since there is no other way to read the gap between the magnet and coil legs since it's all internal and you can't see it.
Pay close attention this is critical measuring and I found this on the internet form a fellow who helped me with reinstalling loose magnets and how to check north and south poles and I also found how to set the air gap with a piece of electricians tape. Hats off to this fellow I'd be lost without him. Only I went one step futher and figured how to make the air gap adjustment.
The bolts that hold the stator on have a slot that is in a circle rotation Pattern however it has a small amount of up and down movement that's probably moves around maybe a couple of 64ths or so this is where your air gap lies.
First establish a mark on the top stator plate near the top bolt area use a small chisel and lightly tap to make a mark. Do the same for the Bottom stator plate near the bottom bolt area and do the same or use a known point to but your 1/64th scale steel ruler from. Write down all of these locations to help in case you forget.
Second establish a chisel mark to the left of the crank - stator area on the starter housing plate flange lip like where the starter shroud bolt goes into the welded nut take a chisel and mark a area above that nut level across from the top stator bolt then mark a area on the starter housing flange lip level for the lower stator bolt. Then take a very accurate distance measurement from these two marks from the top stator bolt area you marked and "Write it down." This is for in case you happen to go to far and you can return to this measurement.
Do the same for the bottom stator bolt level across to the housing flange where you marked. and write down the distance between these two marks with your steel 1/64 ruler. I repeat write down any adjustment from here on for the top adjustment or bottom adjustment.
Now that you have marked the two spots on the stator and 2 spots on the housing flange. Now your ready to set the air gap.
Use a piece of electricians tape which is .008 to .009 ths. we need .012 Air gap so if we double the tape that's .016 to .018 and that's too thick so I used one strip. When you take the tape off the roll don't streach it cause it affects the thickness. Put this tape over the 3 legs of the coil.
Now very carefully put the flywheel back on straight as you can and not cocked from one side to the other it has to be very straight cause the crank is tapered (I say that cause I had six magnets for a lighting coil and they were spaced 1/4 in apart all around the flywheel.) maybe you just have 2 magnets anyway make sure the flywheel is as far back as it goes to be seated - you don't have to put nut on and torque down. Rotate the flywheel 2 revolutions and very carefully take off the flywheel.
Check the electrical tape and if there is no rubs then we have to set the Air Gap
A- Loosen the top stator bolt and ever so slightly move it to the right say 1/2 of a 64th mayb a slight tap from a hammer will do it - measure that you went that much and write it down! and tighten the top stator bolt.
B- Now loosen the bottom stator bolt and move the same distance and write it down! and tighten down the bottom stator bolt. Doing it this way does not disturb the timing because they both were moved equal distances - (if you move say 1/64 on the bottom instead of 1/2 of a 64th the timing will increase to .100th and thats bad.)
C- With the electricians tape over the 3 coil legs carefully put the flywheel back on and seat then rotate the flyweel 2 revolutions and carefully remove.
Now if you see a very slight drag mark on the electricians tape you have established your air gap. if not repeat the above moving the stator towards the flywheel magnets. After this check your timing again and if off a little loosen bottom stator bolt move stator counter ever so slightly counter clockwise to increase B.T.C. settings or clockwise to decrease B.T.C.
I had a mess when I took my flywheel off 3 magnets knocked loose and bad coil I replaced the coil and fixed the magnets and had spark but when I set the timing and moved the stator I lost the air gap and lost fire. I used this electricians tape and measurement movements on the stator and re-established air gap and was my setting ended up at .092 B.T.C and it's tuff to get it this close because .002th. is finer than frogs hair. With patience and fiddling you'll get it.
I put it all back together and held the coil wire next to the head and give the starter a pull and and there was fire everywhere and with a sharp snap. I must of pulled the starter a dozen times admiring my work like a little kid. I beat the system and so can you.....
If you need more email me at firstname.lastname@example.org
like my ole lady says I don't handle defeat to well...
Threw a Rod
P.S. My engine started on first pull hmm.....