Strange timing issue - '68 318

Per the factory manual, timing should be set with the vacuum advance disconnected, and the vacuum port on the carb plugged (although if everything is reasonably correct there should be no vacuum coming from this port, a good crosscheck).

Since you have vacuum coming from the "timed" or "ported" vacuum port on the carb, your throttle plates are slightly open at idle. Also, if you are at 10 BTDC with the vacuum advance connected, and vacuum applied to it, you are probably more like 10-15 ATDC static. This is why your idle drops drastically and the mark moves off scale when you disconnect the vacuum advance. You've confirmed that your vacuum advance works!

So what you need to do is set the timing to 10 BTDC with the vacuum disconnected and capped. When you do this, you'll have to set the idle speed back down some, as I bet it ends up about 1500. Then, as you drop the idle back down, the throttle plates should close just enough that vacuum is no longer present at the timed port. This is how a stock 318 should work.

So, there are a couple of other things to check. You want to make sure your mechanical advance is free and working right. To do this twist the rotor arm clockwise and release. It should turn 3/8 to 1/2 inch at the tip and spring back all the way when released. Also, as a quick reality check, the nipple of the vacuum advance should point more or less to the top shock bolt, or slightly behind (or #6 plug). If you have to rotate the distributor (counter-clockwise) more than this the intermediate shaft is either a tooth or two off, or the wires are not in the right spots in the cap. With the timing mark lined up at TDC, the rotor should point to the throttle return spring bracket (left forward most intake bolt). If it does, the intermediate shaft is installed correctly, if not, it isn't (it happens). Either way, the quick fix is to shift all the wires over one socket in the cap. Big picture here is with the engine at TDC, the #1 wire should be in whatever socket allows you to clock the distributor such that you have a reasonable range of motion to adjust the timing. Looking straight down at the distributor, assuming the rotor points in the normal direction, the #1 wire should be at about 5 o'clock, and the vacuum advance nipple should be about 8 o'clock.

I can't agree that the vacuum advance should be left disconnected. There is no advantage to doing so and many disadvantages. BTW this 318 doesn't have the original timing chain in it does it?!?