Eddy 1405 tuning advice

Well looks like spark issue? See pic of cap. Installed a new cap and replaced coil with a used one.
Test drove with surging, stumble and odd backfire. Backed out idle screw 1/8 turn and tweaked IMS screws. Still surges/stumbles.
Pulled over and removed orange 5" springs for 1 step weaker yellow 4" and surges got worse.
Cruise is when surging happens most.
Vac in park 14, in gear it bounces between 9/10.
Also heres timing check I did before noticing the arcing on cap contacts.

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