You need to get the washer out, one way or another.
When an engine is running, there is a hurricane of whirling oil and air in there, easily capable of spinning a washer around. The washer could nick flying rods, ping up cylider walls, get caught between a cam lobe and lifter, maybe even jam the disti drive gear.
And I'd bet it's a hardened washer. GET IT OUT! If the magnet works, great. If not, you will have to lift the motor and remove the pan. You might get away with just lifting it an inch or so and fishing in thru the gap.
Good luck!
George
