The key to the whole valve lash setting and distributor placement is finding TOP DEAD CENTER on #1 cylinder while on the firing stroke.
The piston is at TOP DEAD CENTER twice, once on the fire stroke, once on the exhaust stroke.
There are several ways to find TOP DEAD CENTER.
1) As stated above, hold your thumb over the hole while the starter is bumped over, when compression blows your thumb away from the hole, you are on the fire stroke. Using the fan belt or pulleys, slow turn the engine till the correct mark line up on the view hole.
2) Pull the valve cover and bump the starter over while watching the valves on #1 cylinder. ( easier with plugs removed ) When both valves are closed, the timing marks should be getting very close to the viewing hole. Slowly turn the engine till they are aligned.
When on the firing stroke at TOP DEAD CENTER, the distributor rotor should be pointing at #1 spark plug wire terminal on the distributor cap. It doesn't have to be pointing at the cylinder or spark plug, just the correct terminal on the cap. Be sure the cap is wired in the correct firing order and the correct rotation direction. The vacuum advance unit is like an arrow pointing to the correct way of rotation. The vacuum hose / tube is on the feather end of the arrow, the pointed end is inside the distributor.
