Weird Timing issue on my 318 V8 5.2L

Hey Guys

I had to replace the water pump and the intake gaskets on my 318 V8. The intake was plug with carbon completely - had that cleaned - started car last night and she'll burn the tires off in an instant ! My question is this:
I put the timing light on it and the line in the harmonic balancer is 2 inches below the timing plate ! When I turn the distributor to make the line come up to the "O" on the plate the engine shuts down. I have been reading on here and had a mechanic friend say that the harmonic balancer has shifted so just adjust the timing by ear. I can live with that since the engine runs so well. My question is this :
Would the shifting of the harmonic balancer in any way affect the way you position the spark plug wires in the distributor cap?
When I replaced the cap I simply put the new wires exactly where the old ones were and she ran fine - but last night I decided to make sure I had the wires in the correct position on the cap and come to find out the wires are off by two positions from Number 1 position - the car will not start now - not even trying to fire off ..........
This is why I am asking ........... could the engine have jumped time at some point in it's life?
My experience has been when a engine "jumps time" is usually will not run - but like I said - she will burn the tires off she runs so well with the plug wires in the wrong position on the distributor cap !

I have also read that I need to un-hook the vacuum advance before timing - I did not do that because I didn't know - will try that tonight after work.......
any ideas?????