Gold Lifetime Member
Join Date: Jan 2000
Location: Wilton, Ca. USA
As far as the timing marks, the dots on the crank and cam gears must be lined up as you said for proper cam timing; however that is not TDC#1, it is TDC #6. After lining the marks up at 6 o'clock/12'oclock rotate the engine one more full revolution; this will be TDC #1. Both will be straight up.
If your cam gear mark is at 1 o'clock with the mark at TDC on the balancer/pointer, I would double check for true TDC#1. It sounds like the balancer is marked incorrectly, the pointer is off, or the outer ring of the balancer has slipped. You need to do this to get the correct amount of timing in the engine. Unfortunately this doesn't affect your noisy lifters.