You did it exactly right. Did you REMOVE THE DISTRIBUTOR CAP? it's absolutely necessary to observe the position of the points, open or closed. If the points are open, that's a normal reading. It's not necessary to turn the ignition switch on; you're just checking for continuity and the meter has its own power source. With the points CLOSED, the resistance should read less than one ohm.
Since the meter reads "overload" (O.L.) with the points closed, my suspicion was correct- - - - -the points are dirty or burned. Either clean or replace them, and the spark will be there. That window-type distributor uses a set of points that should come pre-adjusted so the engine will start when they're installed. If you're cleaning the old ones, and you don't disturb the screw adjustment for point gap, it should not be necessary to do much, if any gap adjustment. The standard point gap for that distributor is .019", which is slightly over the thickness of a business card, but thinner than a credit card. Be sure the rubbing block that contacts the distributor cam is at the highest possible point on the cam when you set the gap. A 1/8" Allen wrench is used to set the gap on the points. Turning the screw clockwise decreases the gap, CCW increases it.
Clean or replace the points, reassemble things, and the spark should be there. Good job so far!
Jerry
