I don't think you understand what a power valve does....so i will try and explain.
the vac #3.5(plenty low enough) is the point in which the power valve(PV) open. when the valve opens, it adds more fuel or richen the idle and main circuit. if you vac was to drop below that 3.5 it would start dumping more fuel in.
Your vac is not that low so it shouldn't open even in gear(but you should check to see) BUT if that PV is bad it will be dumping more fuel in at ALL TIMES. And would cause a stink in the tail pipe.
buy a new one, they're inexpensive, and replace it. IF it was bad you will know it when you fire it up.
I still think you need to grab that dist and give it a turn. bet the vac goes up when you turn it the right way.............
check the idle timing and give it a twist!
one more thing, you said that you are idling at around 1000 rpm. if your centrifugal advance is starting to open at 1000 rpm and your initial timing is at say 15. If you turned you idle down you may find that it is not at 15 but maybe only twelve. so when you put it into gear you loose timing........something to think about:poke: