I don't have experience on your engine, maybe a 261 owner will chime in. All the settings will be in the shop manual for your year engine.
On my 235 I set the octane sensor to 0 and time it with the pointer on the ball.
I check my vacuum gauge. Then I loosen the clamp on the back side and advance it by Turing the housing counter clock wise while watching my gauge and getting the highest setting. In my case 20. Then tighten the clamp. (Idle set at 400rpm)
Fine adjustments also made the the carb mixture screw.
This is just an example, I'm running pertronix ignition. But the procedure should be similar.
My timing light has a dial also. So to find out where I'm at I just point the light at the pointer and turn the dial till the ball lines up.
3B suggestion will help diagnose your problem. I use the port for the wipers to attach my gauge.
