Ok, if I understand correctly, there is only a point gap adjustment, and no separate timing adjustment, only vary the gap to see the timing?
If that is so, the .035 is purely an arbirary start point for timing adjustment, just like most all of the magneto systems on single cylinder bikes of the next era.
You are dead on about NOT "dressing" points. All point faces are tungsten coated, to retard premafure lloint contact face erosion/pitting. File/dress them, wear/pitting accelerates radically quickly.
When we looked online over the phone, we thought the high tension coil was placed inside the cases. Maybe now, I see the H/T coil ckmes directly off the ignition plate???
Edit: I just replied the stator, point gap alone were timing, from what I see. 035 is start point. Two factors control pitting of the points, condenser rating, and how much contamination to the grounds for points and condenser exist. Condenser can be fine, but, impaired ground from oil contamination will do pitting. Corrosion, dirt, name it.
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