I am pretty sure the 261 came with metal timing gears and the chances of losing a gear are pretty slim I would think -
Does the distributor turn? Can you pull it and check for damage to the distributor gear?
Oil leaking from the lifter gallery might mean the drain holes are plugged and the lifter / cam interface went without lubrication = flat cam now.
So if dist turns and no action on the valves = flat cam.
If dist doesn't turn, sounds like the came busted . . .
More information required.
