The biggest concern with a loose-fitting distributor is the possibility of getting an intermittent ground. You could, and probably should run a ground wire from the distributor housing to the block. Since the housing is constantly in motion due to the vacuum advance, use a piece of very flexible wire, like the test leads for a voltmeter use. Regular primary wire will get fatigued and break pretty quickly. You could also press a sleeve of exhaust pipe tubing over the distributor housing and machine it to a closer fit with the hole in the block.
Jerry

"It is better to be silent and be thought a fool than to speak and eliminate all doubt!" - Abraham Lincoln
Cringe and wail in fear, Eloi- - - - -we Morlocks are on the hunt!
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