Last first, pull the dizzy, check to see how much play you have, should not have over .010 in fact I like 5-7. Normally there is a hardened washer near the dist body, its a wear washer, . If you need to , shim that up. Bad deal on bronze gear. Shimming the dist gear, does move the gear further down into the cam gear mesh, judging by your wear pattern. I like to check this when I build a motor, on the stand.
Now, Set the dist into the hole, does not have to be timed, but set without a gasket, check to see if its off the intake mount flats. Determine how much clearance that is, you can put two gaskets to get it up off the oil pump,.
What happens when you don't have clearance or enuff, when you tighten down on dizzy, it loads the oil pump drive gear into the bottom plate and scores it, this is bad and shaved metal gets into the oil system , hopefully the filter. Also causes irratic timing as pump is being labored by cutting into bottom plate.
Since your are using gear drive, you need to have a button of some type as those gear tend to work outwards, I hate those tin covers, guys used to weld a inner wear pad inside the cover to reinforce but you have no button and a tin cover.
Even the cheapo cam button would do but you need a wear point inside that cover. Any of these will work,
Roller button would be better . I run a Cloyes rigid cover and a button. http://www.jegs.com/vpt/Cloyes/Timing+Cover
Roller rockers, romance items, for a long while I only used ball/seat roller tip. Worked well but I graduated to comp steel roller rocker. http://www.jegs.com/i/COMP-Cams/249/...ductId=1199908
There are other rockers out there but I stay away from the chineese stuff. I was at the sema show last year, they have an auto modeling tool that takes precise measurments of anything you need, then they construct auto parts with cheap metals.
Keep in touch.