... While inspecting the dist I noticed that the pickup plate could rock on the slide points and cause the pickup and reluctor points to touch (removed from car). Thanks.....
There lies your problem. The vacuum advance is pulling on the plate & causing them to hit. Mechanical advance doesn't pull on the plate it rotates it as a whole, so it won't cause it to **** & hit. I'd check for worn out plate &/or bushings etc.